Estate Planning of SC, LLC

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The Importance of Estate Planning

Still Not Convinced You Need a Will?

Did you know that the most popular estate plan in America is to do nothing?  Perhaps it is because we don’t like to think about our mortality, but approximately 70% of people in the United States do not have a will.  The foundation of an estate plan is built with three documents:  (1) Last Will and Testament, (2) Durable Power of Attorney and (3) Advanced Healthcare Directives.  While a will controls how the assets will be maintained and distributed after death, a Durable Power of Attorney allows you to appoint someone as your agent to make financial decisions for you and a Durable Healthcare Power of Attorney allows you to appoint someone as your agent to make health care decisions for you in the event of your incapacity.

Intestate Succession, the Elective Share & Omitted Shares

If you do not have a will, your estate will be disposed of by the laws of your state of residence.  Dying without a will is called dying “intestate” and believe me, it is as painful as it sounds.  Under the laws of South Carolina, if you are married and have children, then your estate is split 1/2 to your spouse, and 1/2 among your children.  If those children are minors, then the property cannot be transferred without a guardianship and conservatorship hearing in the probate court, an invasive and expensive procedure that could have been avoided.  Having a will is also the only way for you to leave a portion of your estate to friends or charity.

If you are married, you must leave one-third of your estate to your surviving spouse or they can petition your estate for that share.  This is called the elective share and can only be avoided by executing an elective share waiver or prenuptial agreement.

If you made a will, and later got married, or had children who were not provided for in the original will, then your omitted spouse or child can petition your estate for their share.  To avoid this result, you should update your will when you make any life change.  Don’t forget to review the beneficiaries of your life insurance and retirement plans as well – those beneficiary designations control no matter what your will provides.

Issues with Joint Ownership

Many people think that a good will substitute is to add their spouse or children onto the deed to their house and their bank accounts.  This action constitutes a gift to the spouse or child.  Generally, at the first death between spouses, this isn’t a problem, but if the surviving spouse adds the children, it can become a big problem.  First of all, the gift tax exemption this year is $13,000, so if the gift is in excess of that amount, then a gift tax return must be filed.  Second of all, if the surviving spouse has more than one child, but only one is named on the bank accounts (generally, because that child is the one helping to write checks and pay bills), then those bank accounts pass automatically to that child.  The will cannot control how the joint accounts pass at death.  Most of my clients tell me that that child will “do the right thing” by transferring money to the other children, but if the bank accounts have any significant value, then we run into the same gift tax problem mentioned above.  The worst plan is one that causes more problems than it solves, especially when it causes taxes that would not have been due otherwise. Joint ownership is no substitute for estate planning.  What if the child you added to your bank accounts or house gets into creditor problems or gets a divorce?  Those assets would be subject to the claims of the child.  You can achieve the same management objective with a Durable Power of Attorney.

Estate planning is important; it is an investment in your legacy.  These days, the stock market and economy are uncertain, but I promise that an investment in your estate planning will hold its value for years to come.

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