Estate Planning of SC, LLC

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Archive for March, 2009

Still not convinced you need a will?

Monday, March 16th, 2009

Last Will & Testament 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.

If you do not have a will, your estate will be disposed of by the laws of your estate.  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.  I don’t know many parents who would like to own their home with their 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 made a will, but then 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 under South Carolina law.  All the more reason to 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 says.

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.

I know that you have heard about will kits that you can get on the internet for cheap, but you get what you pay for.  I see many of those plans and have to tell the person that they wasted their money.  Most of the time, you have to check certain boxes to choose the type of will, durable power of attorney or healthcare power of attorney you want.  If you do not check the right boxes or strike out the right provisions, the document may be ineffective because of mistakes in the execution.  For example, there are two types of power of attorney, general and durable.  While both types have no effect after death, a general power of attorney ends upon the incompetentcy of the maker (called the principal), while a durable power of attorney continues through the principal’s incompetentcy until their death.   In the estate plan kit online, the power of attorney usually has two options buried in the document, one says “this power of attorney is not affected by my subsequent disability or incapacity.”  The average person usually thinks, “gosh, I don’t want someone managing my estate if  I can’t tell them what to do,” or more commonly, skips that section all together and just signs the last page.  You need someone who specializes in estate planning to ensure that your documents are crafted specifically to your circumstances and contain all of the right provisions.

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.