Upstate Estate Law, P.C. Blog

Installment H of Estate Lawyer A to Z is HEIRS. What is an heir? Most people think that an heir is somebody that will inherit your property after your lifetime. This is sometimes true, but sometimes it is not true. The term HEIR is defined by South Carolina Code Section 62-1-201(17) as being “those persons, including the surviving spouse, who are entitled under the statute of intestate succession to the property of the decedent.” The SC Code drafters were not being very original inasmuch as Blacks Law Dictionary, Seventh Edition, defines an heir as “[a] person who, under the laws of intestacy, is entitled to receive an intestate decedent’s property.”

So it seems that in order to know what an heir is we need to know what intestacy and an intestate decedent is. Intestacy is simply the default inheritance scheme that takes effect when a person dies without a Last Will and Testament. An intestate decedent is a person who dies without leaving a Last Will.

So what is an HEIR? An heir is a person who is entitled, by default, to a decedent’s property when the decedent leaves no Last Will. So which of our family members are our heirs? I will discuss this in my next post where I will discuss INTESTACY in more detail.

There are actually different types of heirs depending on the circumstances. One type is the forced heir … a person who you are forced to leave an inheirtance to, such as your surviving spouse. Another type is the after born heir … a person who is entitled to receive an inheritance despite having been born after the death of the decedent. Another type is referred to as the laughing heir … a person who is distant enough on the family tree from the decedent to feel no grief when the decedent passes away leaving a windfall to the heir.

So, in what situation does an heir not inherit a decedent’s property? This occurs of course when the decedent leaves behind a Last Will that directs that a person other than an heir is to receive the inheritance.

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.

Good question reader. The person who has the right to be the Personal Representative is said to have the highest right of priority. The right of priority to be personal representative is laid out by statute, SC Code 62-3-203. The statute lists the following persons in order of highest priority to lowest priority:

(1) the person with priority as determined by a probated will including a person nominated by a power conferred in a will;

(2) the surviving spouse of the decedent who is a devisee of the decedent; (a devisee is a person who receives a gift under a Last Will)

(3) other devisees of the decedent;

(4) the surviving spouse of the decedent;

(5) other heirs of the decedent regardless of whether the decedent died intestate and determined as if the decedent died intestate (for the purposes of determining priority under this item, any heirs who could have qualified under items (1), (2), (3), and (4) of subsection (a) are treated as having predeceased the decedent);

(6) forty-five days after the death of the decedent, any creditor;

(7) four months after the death of the decedent, upon application by the South Carolina Department of Revenue, a person suitable to the court.

(8) Unless a contrary intent is expressed in the decedent’s will, a person with priority under subsection (a) (1 through 7 above) may nominate another, who shall have the same priority as the person making the nomination, except that a person nominated by the testator to serve as personal representative or successor personal representative shall have a higher priority than a person nominated pursuant to this item.

If there are multiple people who have the same level of priority to be Personal Representative, the Probate Court will require the Petitioner seeking appointment as Personal Representative to file a Renunciation of Right to Appointment by those not seeking appointment. If the other people will not sign such a renunciation, the Court will require a formal appointment proceeding to be conducted.

If you are having trouble obtaining appointment as a Personal Representative, you should consider obtaining the advice of an estate attorney who can guide you through the process.

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.

Installment G of A to Z is Gift Tax Exemption and Exclusion. The federal government imposes a gift tax on gifts. (Most states, including South Carolina, do not impose a gift tax.) The maker of the gift is generally liable for the tax on the gift. However, all of us are permitted to make a certain amount of gifts without incurring any tax.

The gift tax exemption is the amount of gifts that people can make during their lifetime without having to pay gift tax upon their deaths. This is the lifetime gift tax exemption amount and it currently stands at five million dollars. (The gift tax exemption is unified with the estate tax exemption, so any amount of gifts that reduces your gift tax exemption reduces your estate tax exemption dollar for dollar.)

For example, if you were to make taxable gifts totaling four million dollars during your lifetime, and upon your death you leave a taxable estate worth three million dollars, the four million dollars in gifts will reduce your unified gift tax/estate tax exemption by four million dollars. How much exemption you have left depends on the exemption amount in the year in which you die. This is what is meant by the unified gift tax/estate tax: Taxable gifts made during your lifetime can decrease the amount of estate tax exemption available to your estate after your death.

The other gift tax concept is the gift tax annual exclusion. The gift tax annual exclusion amount currently stands at $13,000.00 per year per person receiving a gift (in 2018 the amount is $15,000.00). This means that you may gift up to $13,000.00 per person per year without reducing your gift tax lifetime exemption amount. Spouses have the option to elect to double the amount of gift they can make to any one person during the year without reducing their lifetime exemption amount, this is called “gift splitting.” Spouses can do this even if the source of the gifts is with one spouse only. This election is made on the gift tax return.

Speaking of gift tax returns, when is one required to be filed? A gift tax return must be filed with the IRS when any person makes a gift to any other one person in a given year in an amount greater than $13,000.00 (or $26,000.00 if spouses elect gift splitting.) Also, a gift tax return must be filed whenever spouses elect gift splitting for a gift made. The gift tax return is generally due by April 15 of the year following the year of the gift. If the gift maker has died before the return is filed, his or her Personal Representative must file the return, and a Personal Representative is permitted to elect gift splitting for gifts made prior to the gift maker’s death.

Unless you give away an amount greater than your gift tax lifetime exemption amount, no gift tax must be paid when the gift tax return is filed. The tax is instead determined after death through the concept of the unified gift tax/estate tax exemption, as described above, ie, the gift made during lifetime reduces the gift tax/estate tax exemption after death.

So there you have a brief primer on the gift tax exclusion and exemption amounts and their interplay with the estate tax regime.

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.

Oh, and the IRS would like me to let you know that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.

Installment F of A to Z is FIDUCIARY. A fiduciary is a person (or organization) that undertakes to act as an agent for another person. In the trust and estate context, a fiduciary is a person or entity who undertakes to manage the assets of another person. A fiduciary who manages the assets of a deceased person is called the Personal Representative (in other states this is called the Executor or Administrator), or it is a trustee who is overseeing the trust assets of a deceased person. A fiduciary who manages the assets of a living person is the conservator of an individual (appointed by the Probate Court), or could be a trustee of a trust for a living person.

The concept of a fiduciary has been around for ages. The fiduciary relationship gives rise to several duties that the fiduciary owes to the individual on whose behalf he or she acts. There is a duty of care owed by the fiduciary. An example of this is the duty of the fiduciary to perform due diligence when investing assets under his or her care. There is a duty of loyalty owed as well, which is illustrated in the duty of the fiduciary to be concerned only with what is in the best interest of the individual for whom he or she acts, and not the fiduciary’s own self interest. The great jurist Benjamin Cardozo wrote what is possibly the most famous description of the duty of loyalty when he wrote: “A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior… the level of conduct for fiduciaries [has] been kept at a level higher than that trodden by the crowd.” Meinhard v. Salmon, 249 N.Y. 458 (1928).

Like any decent lawyer, 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.

I am sometimes asked by potential clients that they would like me to prepare a “simple” Will for them. And I often wonder how the person knows that they require a simple Will.  Furthermore, what is considered a simple Will anyway? Isn’t asking for a simple Will similar to walking into a car repair shop and telling the mechanic “Hey, my car will not run. I would like a simple repair please.”

Your Will may be a simple matter. True. But it may not be. And you as the potential client may not be in the best position to judge this. A number of factors go into potentially complicating an estate plan. As just a few examples, second or troubled marriages tend to complicate things; step children in the family can complicate things; disinheriting potential heirs can complicate things; minor or disabled persons as potential beneficiaries complicates things, missing heirs can complicate things; potential estate tax liability can complicate things; potential income tax liability on retirement accounts can complicate things; and so on.

When you go to an attorney for estate planning services, these are the types of issues that will be dealt with. In each of the above scenarios, a simple Will likely may not be sufficient to protect you, your assets, and your family. While the final estate planning product may appear to be simple, when you are considering protecting your family and your assets, the process to arrive there should not be simple, it should be thoughtful and well-considered.

That is what I would like to be asked for. “A thoughtful and well-considered estate plan.”

Like any decent lawyer, 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.