Upstate Estate Law, P.C. Blog

The South Carolina Bar Association has announced its second annual Aging Gracefully conference.

“The fastest growing segment of South Carolina’s population is senior citizens. As more of the population reaches their golden years the issues associated with the aging process increase. Recognizing and preparing for the legal, medical and social issues that accompany aging is often difficult. This conference provides an opportunity for seniors, their families and caregivers to learn and recognize these issues and make intelligent, informed choices about their care and prepare for the road ahead.”

Two dates available:

Thursday October 8, 2015, 9am-3pm, at the TD Convention Center in Greenville, SC
Thursday November 5, 2015, 9am-3pm, at the Florence Civic Center in Florence, SC

One night while out on the town with some friends, a friend of a friend asked me what estate planning was. I thought about the question for a moment, quickly raced through what my answer should be, and realized that there are many different ways to answer that question. Since the goals to be accomplished by estate planning can be varied, how you might define estate planning can differ.

My answer was three fold. First, estate planning arranges for the orderly transfer of assets to your heirs after your lifetime. Second, estate planning allows you to protect your heirs from the potentially detrimental effects that an inheritance can have. Third, estate planning can be utilized to protect assets from creditors and illness.

The estate planning task can also vary based on the stage of life you find yourself at. If you are at a younger stage of your life, estate planning can address issues such as guardianship for your young children, and management of your children’s finances if something were to happen to the natural parents. If you are at a later stage of life, estate planning can address transmission of retirement assets and protection of assets from medical expenses and, if the estate is large enough, from estate taxes. While we also might focus on the transmission of assets to the next generation, we also have to be concerned with the management of assets in the current generation in the case of disability or mental incapacity.

The typical estate plan is made up of several basic documents. They are the Last Will and Testament, the Durable Power of Attorney for Property, the Durable Power of Attorney for Health Care, a Living Will, and possibly a testamentary or inter vivos trust. We also must not forget that beneficiary designation forms play a large role in the estate plan, and oftentimes these important documents receive scant attention. The documents to be used in a particular estate plan depends on the individual situation.

I am often asked how much estate planning costs. My standard reply is that is a lot like walking into a car repair shop and asking how much to fix a car. The answer is it depends on what you need. You can expect a truly bare bones simple estate plan to run several hundred dollars, whereas an estate plan using one or more trusts can be several thousand dollars. Bottom line is it depends. It can seem like a significant investment, but some attorneys will give you a free consultation to discuss your situation.

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 does not 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

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.

Next up in South Carolina Estate Lawyer A to Z, is the marital estate tax deduction. This is a deduction against the estate tax, and it results in significant tax savings when utilized correctly.

The marital deduction was first introduced in 1948 with the passage of a fifty percent marital deduction applicable to non-community property. In 1977, the marital deduction was changed to be the greater of $250,000.00 or fifty percent of the decedent’s estate, still applicable only to non-community property. In the Economic Recovery Tax Act (there seems to be a lot of these Recovery Acts doesn’t there?) of 1981, the marital deduction became unlimited and it was applied equally to separate and community property. This is where we stand at present with the marital deduction.

There are seven major requirements in order for a transfer to a spouse to qualify for the marital deduction. They are set forth in IRC Section 2056 and are:

• 1. The decedent must have been legally married at the time of death.
• 2. The person to whom the decedent was legal married must survive the decedent.
• 3. The surviving spouse must be a US citizen (or the property is held in a QDOT trust).
• 4. The interest passing to the surviving spouse is includible in the decedent’s gross estate
• 5. The interest must pass to the surviving spouse.
• 6. The interest received by the surviving spouse must be a deductible interest.
• 7. The value of the interest passing to the surviving spouse must be at its net value.

The fifth requirement is one of the more interesting, as it leads to the question of what qualifies as an interest that passes to the surviving spouse. Certainly, property acquired by will, intestacy, elective share, power of appointment, or beneficiary designation qualifies as passing to the surviving spouse. But what about transfers in trust where the surviving spouse only has an interest for life? Do these qualify for the marital deduction as property passing to a surviving spouse?

The rule has existed that terminable interests in property do not qualify for the marital deduction. The reasoning behind this is that while the government is willing to defer the estate taxes owed when the first spouse passes away, the government wants some assurance that it will eventually be paid when the surviving spouse passes away (the marital deduction can be seen more as a delay in the payment of estate taxes rather than a full avoidance of the tax). Property given to the spouse that is a terminable interest would circumvent this principle. Some examples of terminable interests are run-of-the-mill life estates and interests in trusts that fail to meet certain requirements.

What are the certain requirements that could result in a marital deduction being available for a terminable trust interest? Well that would be the QTIP trust (Qualified Terminable Interest Trust), and I will talk about that some more when I get to the letter Q.

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.