In our previous post about Non-Probate Assets, we touched upon life insurance and its role in your estate plan. As a reminder, life insurance avoids the probate process and passes directly to the named beneficiary or beneficiaries providing immediate funds for funeral expenses, mortgage payments and other needs.
Despite its importance, many of our clients report that choosing the right life insurance plan for their needs feels overwhelming. Clients often cite pushy salespeople, confusing policies and lengthy applications as excuses for not handling this task. While we agree the process can be quite challenging at times, we recently have found a post by reviews.com that we wanted to share. It covers the Best Life Insurance policies and a Guide to Life Insurance that's worth your time if this is on your to do list.
Reviews.com has made the process of determining which life insurance policy suits you best in some easy steps. An important step in finding a suitable insurance policy is to first determine whether or not the provider will actually be able to cover you because of its location or specific eligibility requirements. Next, we encourage our readers to find a provider that is financially stable that way if a claim needs to be paid, the provider will have the funds to do so. Finally, insurance policies that have different customizable coverage options, or riders, to better suit your needs are the best types of policies.
We were happy to see that State Farm is currently the front runner for term life insurance as many of our clients give them rave reviews and we've always found them easy to work with. If you're interested in their products, we've worked with and hear great things about Rick Campbell (Summerville) and Tony Pope (Summerville/Mt. Pleasant) and wouldn't hesitate to recommend their services.
If you need to speak with someone about your estate plan and how life insurance should be incorporated, please contact us for a free estate planning consult by phone or in person.
Probate is simply a term used to describe any court matter or proceeding involving the estate of a deceased person. A deceased person cannot continue to own assets, therefore anything owned by that person must be identified and properly transferred to its new owner (called heirs or devisees) through this process. However, before the new owners receive any portion of the assets, the assets are applied toward any taxes, debts, or expenses through what's often referred to as the "probate process."
Prior to the change in our tax laws, people often sought to "avoid probate" as a method of avoiding estate taxes. It wasn't so much the process they were avoiding as much as it was the Internal Revenue Service. Due to the current federal tax laws (which only tax estates in excess of $11 million dollars per person) the strategies to "avoid probate" have lost a lot of their luster. For example, the need for complex estate plans involving family listed partnerships and irrevocable trusts have dramatically declined as often the negatives of these strategies outweigh the positives in the current tax climate.
We warn prospective clients to be careful when using the internet to decide whether or not they need to "avoid probate" at all. South Carolina does not have state estate taxes and therefore advice posted by someone in another state might not apply. We also have a host of simple and cost effective strategies we provide in our blog and during our consults to make the probate process more comfortable for the ones you leave behind. If you have any questions about your estate plan, avoiding probate or whether or not you need a trust please call us for a free consult.
A personal representative can often handle an estate without an attorney, but in some situations it may be necessary to seek legal counsel. Often this is determined by the type and value of the assets in the estate, whether or not the Decedent had creditors and family dynamics that might make an attorney necessary. Here are some things to think about when making this decision:
No Legal Counsel - As we mentioned, many people successfully handle estates without any legal assistance. Although our local probate courts can't give legal advice, they do their best to be user friendly and provide as much information as possible to those handling it on their own. Unlike some states, there is no requirement in South Carolina that the estate have legal counsel. That being said, many people become overwhelmed or confused during the process. Others find themselves making costly mistakes simply because they didn't know any better. For those beginning the estate process and hoping to do so without legal expense, we often recommend coming in for a reduced fee consult so that you can sit with an attorney for an hour to better understand your duties, the required forms and the possible pitfalls you should try to avoid. A consult does not obligate you to hire our firm and we are thrilled when we can answer your questions well enough that you can handle it on your own.
Partial Representation - Hiring legal counsel doesn't have to be an all or nothing proposition. It's often practical and recommended to seek legal counsel for limited purposes. One common example involves estates containing real estate where clients come to us frustrated over trying to record a deed of distribution or clear title to a piece of property. For a flat fee, an attorney can assist solely in the proper preparation and execution of the required deeds. Another example includes an estate which is taxable and may need legal counsel solely to handle the tax related issues. The best way to find out if your situation will work for a partial or limited representation agreement is to schedule a consult with the attorney of your choice.
Full Representation - There are certain situations where a Personal Representative is at risk of being sued for trying to handle the estate without legal counsel. Examples generally include estates with more creditors than assets, estates containing diverse or incredibly valuable assets, estates involving unidentified beneficiaries or beneficiaries with adverse interests, or those where litigation seems imminent. If you have been named as Personal Representative of an estate that will likely require full representation, it's best to interview attorneys early, make sure to take advantage of reduced fee consults and find an attorney that understands the type of estate you're handling and will work with you on various methods of payments when the estate is low on cash.
When deciding whether or not you need representation, there are a few final points to remember:
The probate process is time consuming, intimidating, and stressful. An attorney can help ease the burden. Don't wait too late to find out how we can help - reach out for a consult today.
If you’re in the midst of a divorce, it’s wise to review your current estate plan (or lack thereof), to understand how you need to prepare. In South Carolina, divorce proceedings often take well over a year to complete due to the requirement that parties without grounds for divorce live separate and apart for more than 12 months. While divorce is awful, death is certainly worse and many of our clients aren’t comfortable having their estate plan in limbo pending their divorce. If you’re in this situation, here are a few tips and things you need to know:
Pre-Nuptial Agreements: Make sure your divorce attorney has a copy of your prenuptial agreement and advises you on how it could come in to play during the pendency of a divorce. In most cases a prenuptial agreement often limits (if not eliminates) an obligation to provide for the other upon death. That being said, a prenup won’t override an existing estate plan that was executed after the marriage when all was well in the relationship. As a rule of thumb, do NOT make the mistake of relying on a prenuptial agreement or South Carolina law to “auto-correct” an estate plan.
Trusts / Wills: If there is a trust/will in place it’s important to review the document to recall specifically what it provides for the soon to be ex-spouse. Many mistakenly assume that during a period of separation, any bequests to the spouse will become null and void. This simply isn’t the case. In fact, there is case law in South Carolina which only terminates rights between spouses during a divorce if they have a fully executed and approved settlement agreement in place which addresses this issue. If this is important to you, make sure your attorney includes that language as soon as possible in your proceedings.
Power of Attorney Documents: While there are laws preventing you from disinheriting someone you are still married to (called the “elective share”), there is no requirement that you keep them as your power of attorney. Most of the time, each spouse has listed the other as agent in his or her powers of attorney to make decisions on critical property and health care. If you wouldn’t want your soon to be ex making these decisions, you need to have your attorney update your documents. If you don’t have these documents in place, it’s time to get them in place to make it clear who is in charge of your decisions if you’re unable to make them on your own.
Take the time during the pendency of your divorce to recall and review all accounts that have a POD (Payable on Death) or Beneficiary designation. It’s quite common that spouses name one another for everything from insurance proceeds to annuity plans. Talk to your attorney before making any changes as certain accounts are likely still a part of the marital assets. Once you’re given approval on what accounts you can control, it’s time to decide who should replace your spouse on these documents and accounts and how that falls in line with your overall estate plan. If your divorce attorney isn’t a qualified estate planner, now would be a good time to get a referral.
Unfortunately, there are certain steps that can only be taken once the divorce is finalized. As mentioned, in South Carolina and in many other states, it’s rather difficult to disinherit your spouse entirely while still married. However, reviewing the items mentioned above and getting a head start on planning for your new life as a single individual will keep you moving in the right direction and make sure there is not an unintended windfall for a soon to be ex-spouse.
In an earlier post we discussed the basics of creditor’s claims. If you’re serving as a Personal Representative in an estate with claims, please start with that post and remember these fundamental principals:
First, one of the most common questions we are asked is “Is the Personal Representative personally responsible for these debts if there is not enough money to pay them?” The answer (luckily) to this question is “No.” Accepting the role of Personal Representative does not obligate you to pay another person’s debts. If you’ve heard otherwise, it’s most likely because the Personal Representative also had another legal obligation to that debt. For example, if the parent of a minor child accepts financial responsibility for that child’s medical care then they might be liable for that debt. The fact that they later became Personal Representative for that child’s estate after death didn’t trigger that obligation, it was the parent-child relationship that did so. Another example is a co-borrower on a loan. If you sign a document agreeing to be responsible for a debt then you may become responsible for that debt if the other person dies; however, the fact that you are named Personal Representative does not obligate you. One last warning in this area, there are a lot of very shrewd creditors out there that do a fantastic job of getting people to personally assume debt they aren’t otherwise obligated to pay – don’t do it. Take all paperwork to an attorney for review and fully understand your rights before you sign anything. Doing otherwise could be a very costly mistake.
Secondly, claims that are filed must be paid according to an established priority S.C. Code §62-3-805. If the estate does not have enough assets to pay all the claims in full, this priority will guide the Personal Representative in which claims to pay first. Costs and expenses of estate administration, including attorney’s fees and reasonable funeral expenses must be paid first. Next in line are reasonable and necessary medical and hospital expenses of the decedent’s last illness and/or medical assistance paid under Medicaid to certain individuals. Then, the Personal Representative must pay debts and taxes required to be paid under federal law, then debts and taxes required to be paid under South Carolina law, and then all other claims, in that order. A large portion of these claims fall in this bottom category of “all other claims” (such as credit card debt).
The key here is that every claim in the same category should be treated equally. For example, if two doctors submit claims for medical bills generated at the same time, they should each receive the same treatment. The Personal Representative shouldn’t refuse to pay one claim while paying the other claim in full.
Lastly, please remember that it is important where you get the assets to pay these claims. Funds for the payment of claims should always be paid from the “residue” of the estate first. If there are not sufficient liquid assets (i.e. cash, stocks, etc.) to pay all claims, then other estate assets may need to be liquidated (including real estate).
Please read our previous post on selling assets to help you know how to proceed. If there are still more creditors than there are funds available, the Personal Representative may need to pay each creditor in the same category a prorated amount based on what’s left.
If you’ve read this far then chances are that you’re dealing with a difficult estate where there is potentially more debt than assets. When that’s the case, so many Personal Representatives make the mistake of assuming they can’t afford legal counsel to help when in fact, that’s exactly what they need. An experienced estate attorney can not only guide you through this process but can often rid the estate of significant debt by understanding the process, preventing many creditors who don’t play by the rules from getting paid and negotiating down the debt to leave assets for the heirs.
If you’re getting hassled by creditors, please call us for a consult today.
Despite your position on the current President, his signing of the new tax bill (“TCJA”) provides some distinct perks in the realm of estate planning.
Here are a few of the distinct perks in the realm of estate planning:
South Carolina doesn’t have an estate tax, so our clients only have to concern themselves with the federal estate tax. Although the TCJA does not eliminate federal estate, gift, and generation-skipping transfer (GST) taxes, it almost doubled the exemption. This means that an individual can now pass $10 million (indexed for inflation) through their estate without paying federal estate taxes. Married couples get to double the exemption to $20 million+. WOW! And so you don’t have to Google “indexed for inflation” we can go ahead and report that the 2018 actual amount is $11,210,00 per individual or $22,420,000 per couple. As has been the case in prior years, the unused exemption of the first spouse to die still can be “ported” to the surviving spouse. For those with estates exceeding this amount (yes, we’re jealous), the maximum tax rate remains at 40%.
On a practical level, what does this mean for our clients? It means less than 1% of Americans will ever pay an estate tax. With the exemption set this high, the vast majority of our clients are in the clear (for now). The exemption sunsets after 2025. However, those with significant family wealth or closely held businesses that could exceed the exemption need to prepare as a 40% loss could be devastating.
As we mentioned above, the new law also doubles the lifetime gift tax exemption. Originally enacted to prevent taxpayers from gifting their entire estate before death to avoid estate taxes, it makes sense that these exemptions go hand-in-hand. This means you can give your assets away during your lifetime without fear of tax consequences as long as the cumulative value of the gifts don’t exceed the $11,210,000 exemption.
ANNUAL GIFT TAX EXCLUSION:
If you aren’t aware of the gift tax exclusion, it’s the law that allows you to give away money to as many people as you wish without those gifts counting towards the lifetime exemption we just discussed. This change isn’t dramatic but it’s still an increase. The annual exclusion for gifts increases to $15,000 this year (up from $14,000 in 2017). This amount remains subject to an inflation adjustment as well.
STEPPED UP BASIS:
In more good news, the TCJA did not change the law regarding basis step-up at death. In my opinion, this impacts more of our estates than any of the items discussed above because it helps almost everyone. If you’re not familiar with a basis step-up at death, it’s worth discussing with your CPA or Estate Planning Attorney as understanding how this works might help you decide which assets to gift or sell before death and which to pass through your estate. More on that in a later post.
If you have any questions about other aspects of TCJA, please contact your CPA. If you need more information on how this specifically impacts your estate plan, please schedule a free estate planning consult with us so we can address your unique needs.
We get calls and emails regarding lost Probate Court forms. These usually come on bank holidays or after hours when the court is closed and someone has finally decided to work on the estate but can’t find their forms. While the court is always happy to mail out new forms, the best strategy is to save this link and have them available to download 24/7. The forms are identical statewide so it’s not important which county the estate is in. This is also useful so that you don’t have to worry about writing on forms or messing up an online version by entering data.
These are the five (5) common forms people request:
300ES – This form is used to open an estate under either the formal or informal process. Called an application or petition for probate.
305ES – This is one of the first forms needed to inform heirs and devisees of the opening of an estate. Called information to heirs and devisees.
352ES – There are a lot of legitimate reasons that estates need additional time to file certain documents. the estate might have tax issues, pending litigation or other factors that require an extension of time. This is the form you file to let the court know what’s going on and get permission to file your paperwork later.
361ES – This is the accounting form. The same form is required regardless of whether this is a final accounting or an interim accounting.
410ES – Before most estates can be properly closed, you need to submit a proposal for distribution which lets the court and beneficiaries know what the plan is to close the estate. This is the required form.
South Carolina Probate Court is a form driven court and many estates can be administered without legal counsel using only these forms. However, if you have any questions about these forms or need to consult with an attorney regarding special issues in the area of probate, please contact us.
The majority of Probate Courts in South Carolina have adopted the Supreme Court’s Mediation Pilot Program which began almost eight (8) years ago. Under this program, certain cases must be mediated before they are assigned a trial date. This post provides some basic information on what to expect at mediation.
What exactly is mediation?
Mediation is when individuals (usually with their legal counsel) attempt to find a solution to a legal matter instead of having the court determine the outcome. Mediations are conducted by a mediator, a neutral third party whose sole purpose is to help both sides reach an agreement. These mediators might be chosen by the parties or assigned by the Court.
How do I choose a mediator?
Just like any profession, not all mediators are the same. Factors such as experience and training can have a substantial impact on the outcome. If you have an attorney, they will likely make a recommendation based on the issues to be mediated, the personalities of the parties and even recommendations from the Court.
What should I expect?
Mediation is all about moving forward and finding a solution all parties can agree on in order to end the dispute. Mediators aren’t there to take sides, find the truth or force the parties to do anything they don’t agree to.
While every mediation is different, they generally include the following steps:
Contrary to popular belief, mediation is a simple forum in which both sides can express their grievences in a safe environment in hopes of coming to an agreement that works for everyone. Unlike a traditional win or loose scenario in a courtroom, mediations are most successful when each party compromises. They’ve provided great outcomes for every type of dispute including probate, divorce and child custody and even complex civil litigation.
Provence Messervy has multiple mediators certified in both civil and family mediation and would love the opportunity to help you resolve your dispute outside of the traditional courtroom setting.
Baby boomers beware . . . there’s a new custody battle on the rise and it has nothing to do with family court, divorce or minor children. In fact, the newest custody battle is over YOU and it’s occurring statewide in our Probate Courts.
As many of us age, we simply hope someone will be there to help care for us in our final years.
Do you know who will manage your health and finances if you’re unable to do so?
So, how do we avoid anyone fighting over us in court? Less than one-third (1/3) of our population has executed a Health Care Power of Attorney or General Durable Power of Attorney to name an agent to act in our place. The reasons why vary from person to person but we’ve found for the most part it’s just wishful thinking that we will die peacefully in our sleep without facing the hurdles of aging including dementia and or Alzheimer’s Disease. Statistics; however, tell a different story. One in 3 seniors will die with Alzheimer’s disease or another dementia. One in 8 people over age 65 in the United States has Alzheimer’s disease now, and nearly 50% over age 85 are suffering. In 2014, an estimated 5.2 million people in the United States were living with Alzheimer’s disease. Sobering, isn’t it?
What’s worse is that as a whole, we’re completely unprepared and by the time we realize it (or our family does), it’s often too late because we’ve lost the ability to legally execute these documents. For more information on obtaining these documents, please contact our office for a completely free (no obligation or sales pitch) consultation. And if you’re reading this because you already have a parent in this situation, please make sure to read our other posts on Guardians and Conservators to better understand the Court’s role. Still have questions? Post them here or call/text our office at 843-871-9500. We’d love to hear from you.
Has a loved one recently been diagnosed with dementia or Alzheimer’s disease?
Here’s what you need to know now:
STEP ONE: If you’re concerned as to whether or not the individual in question is capable of making rational, clear-headed decisions about their health care, daily living decisions or placement decisions, you first need to determine if they’ve executed a Health Care POA (Power of Attorney). This document allows an individual to decide for his or her self who can serve as their agent in handling their medical related issues if and when they are unable to do so on their own. This document should not be confused with a General Power of Attorney which addresses banking and other transactional business (and is discussed in other posts on this blog). If your loved one has not executed a Health Care POA, proceed to STEP TWO. If they have, please congratulate them on being prepared as they’ve just saved themselves (and you) a major hassle. Only proceed to STEP TWO if the person they nominated is unable or unwilling to serve or you have reason to believe they are taking advantage of their powers.
STEP TWO: Before approaching the Probate Court or your attorney to begin the Guardianship process, it’s first wise to consult with the loved ones medical provider and personal attorney to determine whether or not it’s too late to have them execute a Health Care POA. Remember, a diagnosis doesn’t mean the person is already fully incapacitated and these professionals can help determine if costly court intervention can be avoided by having a capacity examination and simultaneously executing documents whereby the loved one makes their own choice as to who should make their decisions in the future. This can also prove useful if the loved one needs to revoke a previously executed document because the person they named (their agent) is no longer acting in their best interest.
STEP THREE: Often times referred to as and confused with a “conservatorship,” guardianship is needed when a someone who is incapacitated due to age or disability has not named a Health Care Power of Attorney to address their health care needs. If your loved one didn’t take this step or is no longer able to do so, you must petition the court for guardianship. This process often takes several months and requires that two (2) examiners find the person is no longer able to make their own decisions. Following that ruling, the court will then transfer duties such as daily medical care, living arrangements, and medical decision-making to the petitioner. This process can be timely and in some cases costly, especially if family members disagree as to whether or not a guardianship is necessary or disagree as to who should be making such decisions.
Here are a few common questions we are asked about the process:
The following is a list of possible duties of a guardian:
To the extent possible, the guardian should seek feedback from the ward when making these decisions.
If you need further information related to guardianships, please refer to our blog or contact our office to set up an office or phone consultation. We have a dedicated team of attorneys who work regularly in this area and can help guide you through this difficult process.