Upstate Estate Law, P.C. Blog

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.

Click here to finish this post.

Since it is the giving season, let’s talk estate and gift taxes! The IRS recently announced the new estate and annual gift tax exclusion amounts for 2016. In 2016 the estate tax exclusion amount will be increased to $5.45 million per individual estate, which means a married couple can shield up to $10.9 million from estate taxes. The annual gift tax exclusion amount remains at $14,000.00 per donor per individual recipient.

These amounts had originally been set at $5 million and $13,000.00 respectively, by The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 enacted on December 17, 2010, since indexed to inflation by the American Taxpayer Relief Act of 2012 enacted on January 2, 2012.

If you anticipate that your estate (including life insurance, retirement benefits, and inheritances you might receive from others) may be above $5.45 million individually, or above $10.9 million as a married couple, you should consider a thorough estate planning review. There are often ways to help reduce or even eliminate estate and gift tax liability through careful estate planning.

You can see the IRS announcement here.

Sometimes clients come to me because they have tried to deal with Probate Court themselves, but the Court returned their paper work and directs them that a formal appointment proceeding is required and to go find a lawyer. So what is this formal appointment thing? And when is it necessary? And why do you need a lawyer?

It is definitely preferable to administer estates on an informal basis in the Probate Court. Informal appointment means that the familiar trappings of litigation, such as a summons, service of process, and court hearings will not be required to get appointed as a Personal Representative. Unfortunately, informal appointment is not possible in all cases. In some cases, you must instead proceed formally.

Formal appointment is required in the following circumstances:

• 1. The Decedent did not leave a Last Will, surviving family members cannot agree on who will serve as the Personal Representative, and there is no single person who has priority to serve, or
• 2. The Decedent left a Last Will designating a particular person to serve as Personal Representative, but that person either cannot or will not serve, there is no alternate designation in the Last Will (or there is an alternate but that designee cannot or will not serve as well), and there is no single person who has priority to serve.

So what does formal probate require? Formal probate requires that you file a formal petition with the Court, as well as a summons. Once filed, you must serve the petition and summons on all the heirs of the decedent, as well as all the will beneficiaries, if any. The summons provides a thirty day period for any interested party to file an Answer to the petition. A hearing must also be requested from the Court, and notice of the hearing served on all interested parties as well, providing at least twenty days notice of the hearing.

After the hearing is held, the Probate Court will make its decision as to who will serve as Personal Representative. It is obviously preferable to have all the interested family members in agreement so that informal probate can be undertaken. But in some cases there is no agreement, and the more complex formal probate procedure is available.

When you open an estate and there are creditors who would like to get paid for unpaid debts, you will likely find that creditor’s claims will be made by the creditors filing a claim form in the Probate Court where the estate is being administered, as well as serving said claim on the Personal Representative.

The claim period for doing this is the earlier of 8 months after the Personal Representative is appointed, or 12 months after the death of the Decedent. Once this claim period is expired, it falls to the Personal Representative to determine which of the claims is: 1) valid and must be paid, 2) which is invalid and should not be paid, and 3) which is valid but cannot be paid because there are insufficient assets with which to pay.

What should a Personal Representative do when he or she believes that a claim is either invalid, or is valid but there are insufficient assets to pay with? In this case, the Personal Representative should send a notice of rejection of the claim to the creditor. This is done pursuant to SC Code Section 62-3-806. What sending this rejection does is it puts the onus on the creditor to petition the court for a hearing to have the validity of the claim determined. And it forces the creditor to do this within 30 days of the mailing of the rejection notice. If the creditor fails to file said Petition, the claim will be forever barred.

I need to add a disclaimer here: unfortunately, it is impossible to offer comprehensive legal advice over the internet, no matter how well researched or written. And remember, reviewing this website and my blogs doesn’t make you a client of my Firm. Before relying on any information given on this site, please contact a legal professional to discuss your particular situation.

The Personal Representative of an estate is responsible for marshaling and managing the assets of the estate. One part of this responsibility is dealing with creditors of the estate. There are a number of South Carolina statutes that lay out what this responsibility is.

First off, creditors of an estate must file their claims in Probate Court prior to the earlier of eight months after a creditor’s advertisement is published or one year after the Decedent’s date of death. (SC Code §62-3-805) Personal Representatives can put themselves in serious jeopardy if they pay out funds from the estate to the estate beneficiaries before the expiration of the claim period. Personal Representatives who do so can be personally liable to any creditor who files a valid claim within the claim period but after the PR distributes assets to a beneficiary.

Creditors who do not make their claims prior to the expiration of the claim period will have their claims barred. One exception to this is if the creditor is a secured creditor, such as the holder of a mortgage on estate real property. This debt will not be barred by the claim period, as the mortgage is attached to the property. Typically bills like credit cards, medical bills, and utility bills, are unsecured debts, and can be barred if claims against the estate are not made on time.

Once the creditor’s period is passed, the Personal Representative may pay the valid claims made against the estate. The Personal Representative must evaluate all of the claims made and insure that they are valid debts and the claims have been validly and timely made. The validly and timely made claims can then be paid. If there are sufficient estate assets to pay with, they can all be paid and releases obtained and filed with the Probate Court. If there are insufficient assets to pay the claims, they must be paid according to the statutory order of claim priority, and if there are insufficient assets to pay all the claims at the same level of priority, they are paid on a pro rata basis.

S.C. Code §62-3-805 lays out the following order of claim priority:

Costs and expenses of estate administration, including attorney’s fees and reasonable funeral expenses have the highest priority. Claims with the second highest priority are those reasonable and necessary medical and hospital expenses of the decedent’s last illness and/or medical assistance paid under Medicaid for the Decedent’s benefit. The claims that come next are debts and taxes required to be paid under federal law, and debts and taxes required to be paid under South Carolina law. All other claims are paid last.