Important South Carolina Legislative Decisions. Part 1: Durable Powers of Attorneys

South Carolina’s Legislature passed two key pieces of legislation regarding the area of Estate Planning. The first, which is the topic of this blog post, deals with the changes to the Probate Code surrounding Durable Powers of Attorney. The second, which will be discussed in another blog post, created the South Carolina Uniform Fiduciary Access to Digital Assets Act.

Effective January 1, 2017, the South Carolina Probate Code will include an eighth article, dedicated solely to Durable Powers of Attorney. While the new article reaffirms the majority of the already existing law, there are some key changes.

First, any power of attorney drafted after January 1, 2017, will be presumed to be durable.

As it stands today, for a power of attorney to be durable, the documents must specifically state something to the effect of, “this power of attorney is durable upon execution and is not effected by incapacity.” Barring that language, or language specifically identifying the power of attorney as “springing”, the document is ambiguous under the eyes of the law. The new statute’s presumption of durability means, unless otherwise stated, the power of attorney is effective upon execution and can be used immediately upon the Principal’s incompetency or incapacity.

Second, Co-Agents are presumed to have the ability to act independently, unless otherwise specified.

This change is significant because it automatically deems Co-Agents to have independent authority to act. Meaning, a single agent may act alone and without the signature or permission of the other agent appointed. Co-Agents might not always be able to handle the necessary affairs at the same time they arise, for an array of reasons. This change prevents a hindrance in having to wait to act until both named agents are available.

Third, the statute clarifies the recording requirements for a power of attorney.

Recording of a power of attorney is always been a grey area and interpreted differently by different attorneys. This change require that a power of attorney must be recorded in order to be effective after a person become incompetent or incapacitated.

Fourth, the statute specifically addresses the gifting power.

            The gifting power is one of the most important powers the Principal can grant to an Agent. It is also a power that is most easily abused. The current law does not specifically address this power, but the new statute requires specific reference in the power of attorney of this power in order to grant the power. The new statute also goes into detail about this power and how it is to be used.

Fifth, the statute addresses certain changes that will affect the way attorneys draft powers of attorneys.

The new statute will affect how attorneys are to draft powers of attorneys after January 1, 2017. Some of the changes are basic, i.e. using the term “agent” instead of “attorney in fact” or “incapacity” instead of “disability”. Other changes that effect drafting deals with how the durable power of attorney functions and changes the powers of the agent.

Please be aware that these changes will only effect powers of attorneys drafted after January 1, 2017. Any powers of attorney, legally drafted prior to this effective date, are not rendered invalid by the new statute. You do not have to have your powers of attorneys redone just because the statute changed.

However, if you power of attorney is more than five to ten years old, it might behoove you to have them reviewed by a competent attorney. Similarly, if you powers of attorneys were drafted in a state other than the one you current reside, it would not hurt to have a competent attorney review your powers of attorney as well.

Statutes are always changing. Without change, the laws would not be able to effectively govern in an ever changing world. This is why is vital when wanting to draft estate planning documents, you visit a licensed and qualified estate planning attorney.

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I am _____ Years Old. What Estate Planning Documents Do I Need?

First off, as I’ve stated many times in previous blog, you do not NEED an estate plan. Every state has laws in place to handle situations arising from people with no estate documents. For example, in South Carolina, if you become incompetent or disabled and have no Financial or Healthcare Power of Attorneys, your parents, spouse, friend, partner, etc. can go to the Probate Court and petition the Court to be appointed as you Conservator (Finances) and/or your Guardian (healthcare/everything else). Similarly, if you die with no will or trust in place, South Carolina’s intestacy laws will control and dictate how your estate is distributed.

If you, like so many out there, find that leaving your care and estate up to the discretion of the State to be less than satisfactory, then you should speak with an Estate Planning Attorney and get your affairs in order.

Now with that being said, I am frequently asked by people “I am ____ years old. What do I Need?” Below is a breakdown, by age, of what estate planning documents you should consider based upon your age and current situation.

*NOTE: This breakdown is just a guideline. Everybody has a different situation. Everybody should take this guideline as basic information to get you thinking about the different documents you should have at each age. Talking with a qualified Estate Planning Attorney is the best option because they will be able to give you specific advice based upon your specific situation

Twenty-Somethings:

After the age of 18, financial and healthcare decisions are no longer defaulted to your parents. Many people in this age group, especially those in their early twenties, feel like they do not need an estate plan because they do not have an “estate”.

Single, twenty-somethings, should at bare minimum have a Healthcare Power of Attorney and a Durable Power of Attorney (financial). These documents allow you to name specific agents to make healthcare decisions for you in the event you cannot and to handle your finances in the event you cannot. Barring these documents, if something happens to you, your parents, partner, friend, sibling, etc. are going to have a rough time trying to help make decisions for you.

Married, twenty-somethings, with no children, should have the above mentioned Power of Attorneys and a Will. A will clearly indicates who you wish to handle your estate and how you wish you estate to be distributed. Having the power of attorneys will negate any issues that could arise between  your spouse and your parents. Especially, if the two are not in agreement how to manage and handle your care. Similarly, having a will helps negate any issues over who should handle your estate and how should everything be distributed.

Married, twenty-somethings, with children. Again, all of the documents mentioned above are the bare minimums you should have at this point. Having a will when you have children is even more important because the will names Guardians for your children. If you and your spouse are both kill in a car crash, who is going to take care of your children? The will, naming guardians, will prevent the “battle of the in-laws”, over who should raise your children. A Living Trust is also a good document to consider.

 Thirty-Somethings:

Christina Lesher writes: Typically, this is the decade where you’ve purchased your first or second home, and may be well into starting a family. This is the age where you can begin to gather your financial information including assets, and even if you feel like you haven’t accumulated a large amount of assets, you still need to start planning your estate.

Bare Minimum: Wills, Healthcare Power of Attorneys, and Financial Powers of Attorneys.

At this stage in life, a thinking about a Trust is the best way to go.

Living trusts used by themselves or in conjunction with a will become really beneficial in safeguarding your family in the event you should become incapacitated. A trust is a legal device that states that your assets are transferred into the ownership of a designated trustee, who will manage those assets. You will have to determine a trustee and who will have the right to use the assets (beneficiary).  (Lesher).

Forties and Fifties:

Hopefully, by this stage in life you have some form of an estate plan. If not, then not only should you consider everything mentioned above, but you should also start considering long term care insurance and retirement planning.

Long Term Care Insurance is always something to look into and consider. If the situation arises where you or your spouse has to go into a nursing home, then long term care insurance can help with those hefty bills.

Planning for retirement is extremely important. You need to be able to plan on how to save for retirement and how those funds can be protected should something happen to you or your spouse. It is also important to constantly reevaluate who you have named as death beneficiaries on such policies. As life progresses, people change, and so do who they want their estate to go to.

 Sixties and Older:

At this stage in your life, you should just be focusing on how to refine and update your estate plan so that it suits your currents needs and wishes. Asset Protection planning to protect assets from nursing homes is also a good conversation to start having.

If you have no documents at this stage in your life, it is important to talk to an Estate Planning Attorney and get something together. Your family is going to grieve when you pass. Why make the process even harder because you did not plan well enough to handle your estate?

No matter your age, everyone needs an Estate Plan. Talk to an Attorney today.

 

 

Basic FYIs regarding a Special Needs Trust

The firm I work for frequently hosts what we call “Workshops”. They are seminars on various estate planning topics. Before each workshop we always ask the attendees, “What did you come here to learn more about?” The newest question asked at the last three or four workshops revolves around Special Needs Trusts.

So, what exactly is a Special Needs Trust (SNT)?

A Special Needs Trust is an estate planning tool that allows a parent, guardian, caregiver, or family member, to set aside funds and assets to be used for the care of a disabled person. These trusts are generally created so that the disabled person’s governmental benefits such as SSI or Medicaid are protected.

A lot of the time, having a Special Needs Trust established means the disabled person will still qualify for their government benefits, while having funds available to pay for things above basic care, like dental or eye care. It also could insure there is money in place to help pay for care if governmental benefits are cut back or extra services are needed.

Like other trusts, there are certain important details to be considered:

  1. What type of financial support would the disabled person need if I was no longer living?
  2. Where would the disabled person live if I was no longer living?
  3. Who would tend to the needs of disable child if I was no longer living?
  4. How can I protect the disabled person’s governmental benefits?
  5. Who would be in charge of the trust?
  6. What type of Special Needs Trust is best for the disabled person (ex. First party, third party, testamentary, etc.)
  7. What assets are going to pass to the disable person?

The list can go on and on.

A parent of a disabled child should meet with an experience estate planning attorney to assist with developing their estate plan. An experienced attorney will be able to evaluate your current plan, the goals for any share of your estate for the disabled child, best type of special needs trust, and other important factors.

DIY estate planning is never a good idea, but especially when dealing with a disable child.

For example, a disabled person receiving certain governmental benefits are required to meet a specific income level. If you DIY estate plan and leave a pay on death account to your disabled child, upon receiving that inheritance, they could be dropped from the governmental program because they no longer meet the income requirements.

Similarly, a common estate planning blunder many parents make is leaving their disabled child out of their estate plan altogether. They do this under the belief that by not including the disabled child, they are protecting the governmental benefits, and their other children will use their shares to continue to assist the disabled person. This is extremely flawed logic. Once a person receives an inheritance, it is theirs to dispose of however they please.

A Special Needs Trust alleviates all kinds of issues that could come up down the road. It grants the parents peace of mind to know that when they are no longer able to care for their child, there is a plan in place to care for them.

Each case is different. Each Special Needs Trust developed with be different. If you are the parent, guardian, caregiver, or relative of a disabled person, talk to an estate planning attorney today about a Special Needs Trust.

Benefits of Separate Share Trusts

In the past month and a half I have noticed an increase in prospective clients wanting to know more about protecting assets for a child/beneficiary who has one or combination of the following issues: financial, medical, addiction, or spousal.

When developing an estate plan, it is paramount you understand how distributions work and what that means for your potential beneficiaries.

For example, a married couple has two children. One child is capable of managing their assets, has a job, no financial issues, and supports their family. The other child, however, is an alcoholic or an addict, cannot keep a steady job, and is in financial trouble. The first child would have no issues receiving a sum of money from an estate, whereas, the second child would have some major issues.

For instance, if the second child was an alcoholic and received a sum of $10,000.00, how long would it take the second child to drink up the entire inheritance? Would they survive having that much money to spend on their addiction?

Or what if the second child had a judgment against them or owed creditors money? The inheritance would be gone as soon as they received it in order to settle the debts.

Is that really what the clients would want for their estate? For it to be spent enabling their child’s addiction or to be used completely to pay for creditors? For most, the answer is no. The intention is for any inheritance to be used for the benefit of the child, not to settle debts or feed an addiction.

One prospective client made the comment, “I never expected to have to worry about my adult child inheriting my estate.”

One sure fire way to guarantee an inheritance is used for the benefit of the child/beneficiary is through a separate share trust. A separate share trust can be included in any revocable living trust plan or be drafted into your will.

If the separate share trusts are included in a revocable trust, they come into being after the grantor(s) have passed. Instead of the trust being distributed outright to the named beneficiaries, any designated share would be moved to the specified separate share trust and managed for the beneficiary.

Similarly, a separate trust included in a will comes into existence after the estate and will have been probated. Instead of an heir receiving a distribution, the separate share trusts are created and managed for the beneficiary.

Separate share trusts mean the assets are never transferred into the name of the beneficiary. By the assets remaining in trust, creditors cannot reach the assets to settle the beneficiaries debts. If the beneficiary were to go through a divorce, the inheritance would not be a part of the marital estate. If the beneficiary was struggling with addiction, the separate trust could specify the amount the beneficiary was allowed to receive per month, specify the beneficiary could use any amount necessary for  rehabilitation, specify upon proof of sobriety for a certain period of time would allow an increase in the distribution, etc.

The beauty of a separate share trust is they can be tailored to the specific issues and needs of the beneficiary. Whereas, if the beneficiary were to receive an outright distribution, there is no control over how the inheritance is used.

This is the number one reason why it is important to update your estate plan and talk to an experience estate planning attorney. Life happens. People’s situations change as years go by and it is vital that you make sure your estate plan is equipped to handle the circumstances of your children/beneficiaries.

Separate share trusts are an extremely useful tool to have in your estate planning toolbox. Talk to an estate planning attorney today to learn more about separate share trusts and whether or not they are right for you and your estate.

 

 

 

Procrastination- Why You Still Don’t Have an Estate Plan

“If it Wasn’t for the Last Minute, Nothing Would Ever Get Done.”

calvin-and-hobbes

We all procrastinate. It’s just part of being human. Teacher assigns a project with a due date four months away, you think, perfect! I’ve got plenty of time to brainstorm my idea, put the project together, and make any adjustments! Then three and half months later, OMG I HAVEN’T EVEN STARTED! You throw the project together in two weeks and pray for an a passing grade. Usually, with enough effort, intelligence, and luck, you come out fine. Does that help with you NOT procrastinating the future? Nope.

Everybody Procrastinates.

There are certain things in life that should never be procrastinated. Your estate plan is one of them.

Here are the top reason people of all ages, but especially Millennials, procrastinate their estate plans:

  1. The process of developing an estate plan is intimidating.
    • Yes, it can be if you think you have do it on your own. An experienced attorney can asses your assets, your goals for those assets, and easily identify the available estate planning options that best suit your needs.
  2. Too Expensive
    • Not all estate plans are expensive. The more complex your plan, the more expensive it will be. However, you can either pay now or let your estate pay more later after it goes through probate.
    • Simple plans that include a basic will, durable power of attorney, and healthcare power of attorney, cost usually less than $500 dollars for a single individual. Yes, I am aware most Millennials do not have $500.00 laying, but why not save up for it? You save up for spring break, beach trips, new clothes, and the latest gadget? Why not for your estate plan? Instead of going out and dropping $600 or more on the latest IPhone, why not actually invest that money in an estate plan?
    • Most attorneys will work with you on payments. You will never know until you go visit one.
  3. “I don’t have time”
    • There are 24 hours in a day. Somehow, we as humans manage to jam pack a lot things in those 24 hours. The whole “I don’t have time” spiel just does not cut it. If you can make time to go to the gym, go shopping, go to the movies,  to get your taxes done,etc., then you can make time to go spend an hour or so with an attorney and discuss your estate plan. DVR is a wonderful invention. Set your favorite show to record and make an appointment.
  4. “I don’t have a lot of assets or money”
    • You do not have to have a lot of money or things to have an estate plan. Powers of Attorneys are needed by everybody because they grant someone the authority to make decisions for you and tend to bills. Everybody has bills.
    • If you have a car, a house, kids, a bank account, a pet, a collection of some kind, etc. then you have assets and you need an estate plan. Period.
  5. Too Young (Millennial reason #1)
    • As I have stated over and over again, and will state probably a million more times. YOU ARE NEVER TO YOUNG TO HAVE AN ESTATE PLAN. Once you turn 18 years of age, your parents are not guaranteed to be able to make decisions for you.
    • Youth is not a good excuse. Especially those of us who are in are late 20s to early 30s. Buying our first homes, having kids, having bank accounts. All of those things will be at the mercy of the state if you fail to plan.
    • Youth does make you invincible.
  6. Invincibility – “I’ve got plenty of time”
    • The cold hard reality is, you might not have “plenty” of time. Death does not come for just the old and sick. Death is a heartless purveyor of souls who can swoop down and scoop up anyone, at anytime, regardless of age, health, or social status.
    • When you fail to plan and something happens, albeit death or incapacity, your family and loved ones are left to deal with the consequences.
  7. DIY Options are cheap and quick
    • Legalzoom and alike sites are quick and cheap. However, they provided really basic and general cookie cutter documents that will fall flatter than a pancake if challenged in court.
    • Also, these sites tell you THEY ARE NOT ATTORNEYS. Meaning, they cannot give you legal advice. If the are not giving you LEGAL advice on the LEGAL documents you are paying for, what good are they really?
  8. Lack of Understanding
    • The generalization for estate planning is “it’s something old wealthy people do”.
    • Estate planning is more than just a will. It is more than just simply delegating where your assets go. It’s about preparing for the unknown future.

In my short span as an estate planning attorney, I have seen far too many cases of people who waited to last minute to plan, something happened, and now their family is having to scramble to figure out what to do.

When the “last minute hits” you might not be able to make your plan. If you get in a car wreck, end up in a coma, and need someone to make medical decisions for you and you lack a power of attorney, how do you expect to grant anybody that authority? You can’t. It’s too late.

I think people wait because they believe they will “know” when they need to make a plan. Life does not give warnings. You are not going to an email or text saying “you are going to be hit by bus tomorrow, go to attorney today” or “you’re going to have a heart attacked Friday at Noon, is your estate plan ready?”

Only being PROACTIVE and not a PROCRASTINATOR will ensure you peace of mind in knowing whatever life brings, you are prepared and your family and loved ones have the tools to take care of you.

How Can I Avoid Probate?

This post is the follow-up to “So, What Exactly is Probate?”. As mentioned before, the two most popular questions asked about the Probate Process are “What is Probate” and “How Can I Avoid Probate.” Here we are going to answer the latter.

So, How Can I Avoid Probate?

If you have decided you do not want your heirs to have to worry about probating your estate, there are several options available.  Probate only deals with assets that remained in your individual name at the time of death.

For example, Husband and Wife have a join bank account and are both named on the deed for their residence. The bank account and residence state Husband and Wife are joint tenants with rights of survivorship. Meaning when one passes, the surviving spouse automatically takes possession of the asset, and probate is not necessary. However, when the surviving spouse passes, all of the assets now in their name only, will have to be probated.

One of the simplest ways to avoid probate is by creating a Revocable Living Trust.

A trust is a contract between the Grantor (the person who creates the trust), the Trustee (one who controls the trust) and the beneficiaries (those entitled to benefit from the trust). Amazingly, under the law, you can be Grantor, Trustee and Beneficiary at the same time! You, as Grantor, determine how the trust will be operated by the Trustee and who benefits, how and when. You can create a trust that permits you to be Trustee and give yourself the right to receive full benefits from it. 

It permits you to keep total control and access to all your assets during your lifetime, and provides for the distribution of your assets to your beneficiaries at your death. We often refer to a revocable living trust as your “Book of Instructions.” Meaning, upon your passing, your heirs will follow the instructions in the trust, and distribute assets accordingly.  No Probate Needed.

Now, a Revocable Living Trust might not be the answer for everybody. Trusts are usually cost a couple thousand dollars or more to set up and they involve some work and effort to fund. Also, some clients estates may not be conducive to a trust.

The following are two special alternate estate planning tools for dealing with estate planning and real estate.

Life Estate Deed: A “life estate” is the right to live and occupy real property for an entire lifetime. The life estate deed divides ownership of real property between two parties: “Life Tenant” and the “Remainderman”.

The Life Tenant enjoys the use of the property for the duration of his/her life and is responsible for the taxes, insurance, upkeep, and other expenses related to the property;

  • At the death of the Life Tenant, ownership of the property passes directly to the Remainderman, with no need to Probate a Will;
  • Unlike an outright gift of real estate, the life estate deed transfer retains the benefits of certain income tax basis rules;
  • A life estate does not have to be liquidated to pay for nursing home expenses. It is an excellent asset protection tool;

The Life Tenant(s) and Remainderman have to consent to the sale of the property during the Life Tenant’s lifetime, and the sale proceeds are shared between the life tenant and Remainderman.

Real Estate Trust: A real estate trust is a type of Revocable Living Trust (RLT) that can also be useful to transfer ownership of real property at death without having to probate a will.

  • A Real Estate Trust is an abbreviated RLT. It is a trust that only contains real property- no bank accounts, no stocks;
     
  • Like a RLT, you retain full control over the trust and any real property therein for your lifetime;
  • The trust avoids probate, so that upon your death, any real property in the trust will pass to the beneficiary(ies);
  • The legal fees for creating the real estate trust are more affordable than your standard RLT.

Each technique has positives and negatives, but they all have one simple principle in common: arrange assets so that there is nothing in your name that does not automatically pass to someone else upon your death.

As always, talk to qualified Estate Planning Attorney in your area about these issues. Only an attorney can assess your estate and advise you on the best course of action.

 

 

So, What Exactly is “Probate”?

The most frequently asked questions I’ve received as an estate planning attorney deal with the term, “Probate”.  The two most popular are: “What is Probate” and “How can I avoid Probate”.  Today, we are going to tackle answering the first question, “What is Probate?”

So, What exactly is Probate?

The legal definition of probate is: “The act or process of proving a will. The proof before an ordinary, surrogate, register, or other duly authorized person that a document produced before him for official recognition and registration, and alleged to be the last will and testament of a certain deceased person, is such in reality” (Thank You -Law Dictionary: What is PROBATE? definition of PROBATE (Black’s Law Dictionary) ).

Every state has a Probate Court, though they are not all called “Probate Courts”. South Carolina refers to this type of court as the Probate Court, but Maryland, for example, calls it the Orphan’s Court.  Regardless of the name, the purpose of this court is to facilitate the “proving of a will.” Now, every state handles the probate process differently. Some, like New Jersey, have a relatively simple process when your estate is going to children. South Carolina has a lengthy and potentially costly process, but it is not the worst state. California is rumored to have one of the more complex probate processes.

There are two absolutes no matter what state you reside. First, every state has a probate process. Second, if you die without a will, you fall under the “intestacy” category, and every state has a plan in place to probate your estate.  (More on “intestacy” later.)

Okay, so who has to go through Probate and how does Probate work?

The simple answer is: everyone who dies with no Last Will and Testament or those who die with only a Last Will and Testament, have to go through the Probate Process.  Those who have a Trust avoid probate (this will be discussed on a another blog post).

Now, for those who die “intestate” meaning no will, the state has a plan for how your estate will be distributed. The Probate Judge will assign someone to be your “Executor” or as we call them in South Carolina, your “Personal Representative”. This person is tasked with administering your estate. They are responsible for notifying any heirs, creating an accounting of your individual assets, opening an estate account etc. Then after the statutory time period has elapsed, the court will approve an order closing the estate and how the estate shall be distributed.

Those who die with a will, have named a Personal Representative. The named Personal Representative will present the will to the court and administer the estate, following the same process as detailed above, and ensure the distribution of assets in your will is followed.

In South Carolina, the probate process takes at minimum a year. Yep. 365 days between death and your estate being distributed to your heirs. And that time frame is only if everything goes smoothly and deadlines are met. The main reason an estate takes so long to probate is the statutory period of having to leave the estate open for 8 months, to allow creditors time to make a claim against your estate.

Other impediments that cause a lengthy probate are:

  • Will contests
    • Any disgruntled heir can go online and complete a form contesting a section of the will. When is the done, the court has to have a hearing to address the contest. This puts the probate process on hold and it will not resume again until a ruling has been made regarding the contest.
  • Naming Multiple Personal Representatives
    • I’ve seen several probate estate where the decedent named two or more children as  co-Personal Representatives. This lengthens the process because all of the named PRs must sign the documents and participate in the administration of the estate. If each PR lives in a different state, gathering documents takes even longer. Also, sometimes the named PRs do not get along causing the process to slow down.
  • Issues gathering necessary information
  • Contests about the named Personal Representatives
  • Contests about the plan of distribution
  • Trying to probate the estate without proper legal counsel
    • Some people feel they can probate the estate on their own. You have the right to probate an estate without legal counsel, but if you are unsure what to do or forget to do something, the process stalls.

And so on and so forth. Each estate that is probated is different, so there is no way to tell if a particular estate will be easy or complex.

If you have a will, review it. Check that the distributions are still relevant to your current wishes and that those named as Personal Representatives are still choices you want.

It never hurts to have a qualified attorney review your documents to see if your will is executed correctly, distributes your assesses accordingly, and clearly shows your intent in regards to your estate. You should also talk to an attorney about Probate. An attorney will be able to review your existing will and walk you through the specifics of the probate process and how the process could impact your will.