If you’re putting thought into the best estate planning solution for your assets, you may have considered forming a Trust for your children and/or grandchildren. A Trust can be a great option to protect your intentions for your estate, while providing for your family. However, a Trust is not always the best solution for every estate plan. Consider the following pros and cons of setting up a Trust for your heirs:
- Trusts are not “one size fits all”
There are several different types of Trusts including Revocable Trusts, Irrevocable Trusts, and Special Needs Trusts. The main difference between a Revocable Trust and an Irrevocable Trust is the grantor is also the Trustee and primary beneficiary, retaining ownership of their assets. When forming an Irrevocable Trust, the primary beneficiary is a third party, such as the children, effectively transferring ownership of their assets to the third party. Special needs Trusts can be created to provide for an heir who is physically or mentally disabled without the funds affecting their eligibility for social security disability benefits.
- You set the conditions
When you create a Trust, you can place certain conditions that your heirs must meet in order to inherit assets from the Trust. Conditions cannot require a beneficiary to break the law or go against public policy.
- Protect assets from creditors
Creating a Trust requires the grantor to transfer ownership of the assets and funding the Trust. As such, there can be significant asset protection advantages to choosing this type of Trust thereby protecting certain assets from creditors.
- Avoid probate
Assets in a Trust do not have to go through probate because the assets were already distributed when the Trust was funded.
- Although you maintain control over the assets, you no longer have legal ownership of the assets in a Trust
As mentioned above, while there can be benefits to creating a Trust, you do have to transfer your assets into the name of the Trust. And, depending on the type of Trust you choose, although you may maintain control, you may not technically maintain ownership of the assets. This is why it is important to seek the assistance of an Attorney when considering a Trust.
- Properly forming a Trust can be complex
There are many details involved in forming a Trust—one of the most important of which is funding the Trust. It is not uncommon for individuals to devote time and money to creating a Trust with conditions that reflect their wishes, yet fail to fund the Trust. If an asset is not in the Trust, then the Trustee has no authority over it and that asset will be distributed according to the Will of the deceased owner or according to the intestacy laws in the state where the estate is probated.
- Creating a Trust can be expensive
The legal fees and accounting fees involved in creating a Trust can vary widely depending on who you hire, the extent of your assets, and the complexity of the Trust you are creating. However, generally there are even more financial incentives to creating a Trust, due to the asset protection a Trust can provide and the elimination of the need to go through the Probate process.
If you are wondering if forming a Trust is the best choice for your estate plan, contact our law office and our experienced estate planning lawyers can advise you on the best solutions for you and your family.
Most people think of a “Will” simply as a document that expresses their wishes of who should inherit their property after they pass. However, every state, including South Carolina, has specific statutory laws that impose certain requirements in order for a Will to be valid and enforceable.
If a Will is not validly executed, then it will not be enforceable. If an individual does not have an enforceable Will, their property will be passed on as if they did not have a Will at all, according to intestate laws. Intestate laws determine how an estate is distributed, rather than the individual’s expressed wishes.
Here are a few situations in which a “Will” is not a validly executed Will and will not be enforceable:
The “Will” is written on a napkin.
Simply writing your wishes as to how your estate should be distributed after your passing on a napkin or some other note will not create a valid Will. Handwritten notes signed only by the testator—the person creating a Will—are called “holographic wills” and are not valid in South Carolina.
There are no witnesses.
South Carolina law requires that a Will be signed by at least two witnesses who saw the testator sign the Will or witnessed the testator’s acknowledgement of their signature.
The Will is not in writing.
Merely telling someone how you want your estate to be distributed or even making an audio recording of your wishes will not create a valid and enforceable Will. In South Carolina, a Will must be in writing to be valid.
There is no signature on the Will.
To be valid, a Will must either be signed by the testator or signed by someone else at the direction of the testator. This means that if the testator were unable to personally sign the Will due to some physical limitation, the testator could request another person sign the Will, under the direction of the testator, on their behalf.
The testator’s mental capacity is in dispute.
Under South Carolina law, a testator must be of sound mind at the time they signed the Will in order for the Will to be valid and enforceable. Generally, in determining if an individual was of sound mind at the time of the drafting of the Will, the Court will consider whether the testator understood:
- the act of creating an estate plan;
- the extent of their property;
- their family tree and relationship with family; and
- who they are passing their property to.
If you are the Personal Representative of a Will or a family member or friend of a recently deceased individual, you may be wondering what types of situations necessitate a probate court action and whether you will need to hire a lawyer.
Perhaps the first most important factor on how your loved one’s estate will be administered is whether or not they died with a valid Will in place.
Probating an estate WITH a Will
When someone dies with a Will in place, and the Will was validly executed, the Estate will generally be probated through an informal process at the Probate Court in the County of the Decedent’s primary residence and according to the wishes of the deceased.
Probating an estate WITHOUT a Will
When someone passes away without a Will, they are said to have died “intestate”. The Estate of a person who dies intestate is passed on according to South Carolina law and is probated in the County of the Decedent’s primary residence
The second most important factor in how the probate process will work is whether there are any disagreements or disputes involved in administering the Estate. Generally, if there is no disagreement or dispute involved, the Estate will be probated through an informal process. However, sometimes the circumstances may call for the supervision of the Probate Court. These circumstances include:
Family members fighting over differing versions of a Will.
If there are multiple Wills, the Probate Court will get involved to determine which version is the valid Will.
Disputes about whether there is a valid Will.
There may be disagreement about whether any valid Will exists at all.
Subsequently born children not included in the Will.
If all children alive at the time of the drafting of the Will were included in that Will and another child was born after the Will was executed, most people will generally assume the deceased would have meant to include that child and provide for that child to inherit an equal share. Certainly, there are many details in a situation like this that could give rise to a dispute.
If there is Real Property or Personal Property of a high value.
If there is no Will, a formal petition must be filed to obtain permission from the Court to sell Real Property or personal property with a high value.
These are just some of the situations that may require a Probate Court to help settle an issue involved in the administration of a Will.
When do I need a lawyer?
As an executor of a Will or a family member involved in the administration of an estate in South Carolina, you should seek the advice and counsel of an Estate Planning or Probate lawyer in South Carolina if you encounter an issue with the drafting of a Will, the validity of a Will, multiple Wills, disputes between family members and friends, or need to sell Real or personal property. Even those experienced in Probate issues sometimes find it is less stressful to simply hire an Attorney to handle things. An experienced Probate lawyer can walk you through the process of probating the estate in South Carolina in both informal and formal probate situations.
If you have been appointed as the Executor of a Will—or a “Personal Representative” as the position is known in South Carolina—you might be wondering what your responsibilities are and what you should be careful of. In this article, we will address some of the common concerns for first-time Personal Representatives.
If you are appointed as an Executor, you have a choice to accept the appointment or seek to be relieved of your duties with the Probate Court. If you accept this appointment, you can be held personally liable for certain mistakes that are a breach of the “Duty of Care.”
One of the responsibilities of the Personal Representative is to pay the debts of the Estate before paying beneficiaries. If the Executor fails to do so, she or he may be personally liable to creditors for the debts of the Estate. Note that if the Executor takes all proper steps and the assets of the Estate are insufficient to cover all debts, the Personal Representative will not be personally liable for the remaining amount owed.
While similar, Probate requirements differ from state to state. In South Carolina, the Probate Court has jurisdiction over the settlement of estates. If the Executor and beneficiaries are in agreement about the terms of the Will, the Probate process is quite simple and streamlined. If there is a dispute about the Will, the Probate Court will closely supervise the process.
If you are appointed as a Personal Representative of a Will, you should make an appointment with an Attorney in the county where the decedent lived, after you receive a copy of the death certificate and obtain the original Will, if there is one.
The Attorney can help you to determine whether a full probate action is necessary based on the assets owned by the decedent at the time of passing. If necessary, the Attorney can assist you in filing the Application for Appointment and Probate. Once you are appointed, a notice will be published in the newspaper to alert creditors that the Estate is open. The Executor must send notices to all of the beneficiaries and heirs within 30 days after receiving the appointment as Personal Representative.
A notice of inventory and appraisement of the assets of the Estate must be completed by the Personal Representative and sent to the Probate Court as well. This is an inventory of the assets owned on the decedent’s day of passing. It does not include assets obtained or received after passing.
Finally, the Personal Representative must pay claims to creditors according to the provisions of South Carolina Probate Code and execute the terms of the Will. Your Attorney can assist you in determining what claims must be paid and in what order. Once all creditors claims are paid, the Personal Representative may proceed with completing the Final Accounting and Application to Close the Estate.
Estates valued at less than $25,000 are subject to South Carolina’s Small Estate laws, which follow a more streamlined approach to settling an estate. Certain processes may be expedited with a small estate affidavit.
Fiduciary Income Tax
The Executor of the Will is responsible for filing state and federal income tax returns for the Estate. In South Carolina, a tax return must be filed if:
- There is a non-resident beneficiary;
- The estate has gross income of $600 or more for that tax year; or
- The estate is in bankruptcy.
Federal estate taxes only apply to estates valued at over $5 million.
Safeguarding Estate Assets
One of the duties of the Personal Representative is to safeguard estate assets. This involves identifying estate assets and ascertaining the value of those assets. The Executor is responsible for paying all debts of the Estate and then keeping assets safe until beneficiaries are paid. This includes making sure that real estate is maintained and personal property is cared for and protected from theft and other threats.
Unfortunately, it is not uncommon to encounter family conflict when executing a Will. Some people may feel certain beneficiaries were left more than they deserve and others may feel entitled to assets that were not given to them. As the Personal Representative, you have a legal obligation to carry out the terms of the Will—regardless of your personal feelings about the terms of the Will. If necessary, the Probate Court can play a role in settling disputes over the Will.
You’re an adult. You work, pay bills, and make your own decisions. You have car insurance and a savings account. In your day-to-day life, you have things relatively under control.
But what if something happened to you? Have you made a plan for how your affairs should be handled in the unfortunate event that you become unable to express your wishes? Who would have the ability to sign your checks to pay your bills? Do you have a plan for how your children would be cared for if you could no longer care for them? What about your estate?
No one likes to think about these kinds of scenarios—but it’s all part of being an adult. Here are four legal documents you must have:
1. A Will
Most people plan on living long healthy lives into their elderly years, and it’s becoming more likely with medical advancements that you will. However, the truth is that tomorrow is promised to no one. That’s why it’s important to have a properly executed Will in place.
When a person passes without a Will, their property is passed down according to state intestate laws. Intestate laws are statutory laws that determine which next of kin will inherit your property and what portion of your estate they will inherit. In South Carolina, if you are married with children, your spouse will get 50% and your children will get 50%. Most people, however would prefer their spouse get 100% if they are still living and for their children to inherit, only after the second of you passes. Having a Will in place allows you to determine who will inherit your property and under what circumstances..
Also, a Will allows you to appoint a guardian for your children in the event you become incapacitated or pass away.
Keep in mind that simply writing down your wishes on a piece of paper will not create a proper Will. Each state has guidelines for the proper execution of a Will, which nearly always involve witnesses to the signing of your Will. Consult an experienced estate planning lawyer to draft a will that reflects your wishes for your estate. A lawyer can lead you through the process of properly executing your Will so it is legally enforceable later on.
2. A Durable Power of Attorney
If you were to become incapacitated, a Durable Power of Attorney would enable a person who you appoint to make legal, and financial decisions on your behalf. Your Durable POA allows your Agent to pay your bills, buy and sell assets, communicate with your financial institutions and much more. Think about it, if you were in an accident, if your bank account is not a joint account, your spouse does not have authority to write checks from that account in order to pay your daily bills. What if that accident caused you to be permanently disabled? Without a Durable POA, your loved one may not be able to sell your home to pay for your long term care.
3. Health Care Power of Attorney
A Health Care Power of Attorney sets out your medical wishes, should you become unable to express them yourself. Having a Health Care Power of Attorney in place will not only give you peace of mind, but it will make responding to a stressful medical emergency easier for your family because they will have the authority to make medical decisions for you.
4. Declaration of a Desire for a Natural Death (Living Will)
A Declaration of a Desire for a Natural Death, also called a Living Will, sets out your wishes for your care in the event you have a terminal illness or are in a persistent vegetative state. Some examples of directions you can include in a Living Will are:
- Do you want CPR performed in all circumstances?
- Do you want to be fed intravenously if you cannot eat or drink?
While it’s not always pleasant to think about these legal documents—all four are important and necessary. Once you have them in place, you can enjoy the peace of mind that comes with knowing your affairs are all in order, and your wishes and loved ones will be taken care of.