Upstate Estate Law, P.C. Blog

My simplest Last Will and Testament is currently about 6 pages long. My next most complicated Last Will and Testament comes in at about 20 pages. Admittedly, this can be a lot of pages for a client to read through. And a large portion of the Last Will is filled with legal terms and phrases that do not make for the best leisure reading. So why does your “simple Last Will” have to be so long and complex? I see two major reasons why this is the case.

Firstly, when I draft a Last Will for a Client, I am thinking about what will happen to the estate and estate beneficiaries if the unexpected happens. If we could all be certain that our estates will be administered exactly according to plan, perhaps the Last Will could be simpler and shorter.

But life does not always go as we think it is going to go. Lots of events could occur that change the effectiveness of a Last Will. An estate beneficiary could unexpectedly pass away or run into issues of financial mismanagement, divorce, disability, or drug addiction. Particular assets could be sold off or lost. Nominated Executors can pass away or find themselves not approved by the Probate Court after your lifetime. Since some of these issues can reasonably be anticipated and planned for, you will find that even my simple Last Will contains many provisions and clauses for dealing with these kinds of events.

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1. Probate Avoidance. Regardless of whether there is an estate tax or not, the probate fees on most estates averages 1 to 5% of the total value of the estate, not including any loans on the property. For example, if you own a $500,000 home at death and there is a $300,000 loan on the property, the statutory probate fees are calculated on $500,000, not the $200,000 of equity. The combined probate fees in South Carolina on an estate that is $1.0 million, for example, could range from $5,000 to $15,000 when the probate inventory fees, possible bond fees, attorney’s fees, and all the court filing fees are added up.

Not only are the statutory fees relatively high compared to a trust administration, a probate case doesn’t cover things such as changing ownership of retirement accounts, managing distributions from life insurance policies, etc. And the probate process in South Carolina usually takes 9-12 months in most Probate courts (and that is if the estate is fairly simple). And one of the things that most people probably don’t even realize is that when a probate action is filed, the deceased person’s entire estate is now open to public disclosure. All court filed documents are readily accessible by anyone who searches.

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When a loved one has a trust and has passed away, administration of the trust will be necessary. The trust may either need to be distributed or continued for the benefit of its beneficiaries, depending on the trust terms. The person or people designated to serve as the Successor Trustee need to understand what should happen at the time of death of the person who creating the trust. While administering a trust is generally simpler than probating an estate, a trust is not self executing.

There are administrative tasks and expenses that revolve around trust administration that families and Trustees need to understand. The first thing that should happen during trust administration, is that an “administrative” trust should be set up with its own tax identification number. The trust, depending on how the estate planning has been set up, may pay for funeral expenses and possibly last illness expenses of the deceased, as well as ongoing bills and attorney or accountant fees. With the new tax identification number the successor Trustee can set up a new bank account in the name of the “administrative” trust to track all income and expenses. Meticulous record keeping is essential when administering a trust.

There are many other things that can happen in a trust administration.

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In 2019 the federal Estate Tax Exemption is 11.4 million for an individual or 22.8 million for a married couple.

So how does this effect you? 

Put simply, this will only effect you if the total value of your estate exceeds the estate tax exemption amount. The vast majority of estates do not approach this level, so estate tax planning does not have to be a concern for most people. Which is nice, because now much more focus in estate planning can be on other issues, such as asset protection, income tax, and taking care of your family, over having to plan around the estate tax, which in its day was quite onerous.

What if your estate is over the estate tax exemption amount?

Then we should talk about an estate tax plan. If your estate is over the estate tax exemption amount, then your estate will be required to pay a marginal estate tax rate of 40%. This can be avoided through advanced estate planning and protection planning. Sometimes just an irrevocable life insurance trust is enough to adequately deal with estate tax concerns.

The new 2019 Estate Tax Rate will be effective for the estates of decedents who passed away after December 31, 2018.

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As the U.S. population ages, elder financial abuse is predicted to be a growing problem. Vulnerable people can become victims of scammers who are able to convince people to send money from banking and investment accounts. According to the Financial Industry Regulatory Authority (FINRA) (the organization which regulates firms and professionals selling securities in the United States) its Securities Helpline for Seniors has received over 12,000 calls and recovered more than Five Million Dollars for seniors whose investment funds were illegally or inappropriately distributed since it opened in 2015.

To further try to combat this issue, FINRA has issued two new rules to help investment brokers or advisors to protect seniors’ accounts from this exploitation. The rules went into effect in February 2018. They apply when opening a brokerage account or updating information for an existing account.

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