Estate Planning

Estate planning is the process of arranging what will happen to your estate when you pass away. There are many tools and complex schemes available, but this guide focuses on basic estate planning documents and concepts. The primary documents utilized in estate planning are a will, personal property memorandum, power of attorney, Declaration for a Natural Death/ living will, and sometimes trusts.

Signing documents in a lawyer’s office, however, is not the end of the process. Estate planning involves understanding your assets, how to title property, life insurance, using codicils from time to time, and other important elements.

This guide will help make sure you understand the essentials of estate planning.

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What are the Benefits of an Estate Plan?

Leave your assets to the people you want,
Better protect your assets,
Avoid Probate and government intrusion into your estate,
Reduce taxes,
Designate fiduciaries to care for your property and loved ones (kids),
Understand non-probate v. probate property,
Create a Health Care Power of Attorney, and
Decide if you want a Living Will.

What is a Will?

Allows you to determine how your property will be distributed after death, who will care for minor children, and provide an opportunity for you to communicate your wishes. Wills often work with other elements of your estate plan.

Personal Property Memorandum

A personal property memo allows the testator to specifically lay out the distribution of their personal property. This can be attached to a will to guide the executor in distributing assets (ex. Jewelry, furniture, etc).

Power of Attorney

Understanding how a Power of Attorney works is an essential tool in estate planning. Most people have a general understanding of how it works, but it can be tricky figuring out what kind of Power of Attorney works best. A Power of Attorney (POA) is a written instrument authorizing a person (agent) to perform specific acts on the part of the individual (principal) who granted the power under S.C. Code Ann. § 62-5-501. These documents are considered “durable” when they contain language establishing the principal maintains the intent that the individual holding the power exercises the power when the principal is physically or mentally incapacitated.

POAs allow for decision making powers to be delegated to another person, and because of this, they must be reasonably definite in their terms to prevent mistaken belief about what the power granted allows the agent to do. Powers that can be granted by a POA include: the power to create a trust (irrevocable or revocable), power to disburse assets of principal, power to convey property, and power to designate beneficiaries.[i]

There are other variations, including Durable POAs, Springing POAs and Health Care POAs.

Durable POA – A Durable Power of Attorney is a document that appoints an individual to act on your behalf. They can be done generally or specifically by a written agreement. A durable power of attorney will stay ineffective if the individual becomes incapacitated and cannot act on their own behalf.
Springing POAs – They differ from the durable Power of Attorney in that a springing POA is triggered by a term stated in the document that the principal of the power has been deemed incapacitated. The legal document can also determine what incapacity is for the power to be effective, meaning that the agent seeking to use the power does not need to get a determination of incapacity by a court for the power to be used.
- For example, a Springing POA may define the principal’s incapacity as determined, “the agent’s authority is activated when the principal so provides or when the principal’s attending physician executes a written statement that the principal is not capable of making decisions in financial and personal matters.” When there is a provision similar to the one mentioned, there is no need for a court determination of incapacity for each exercise of the POA power. There may be a need to receive a court determination of incapacity each time the power is exercised without this provision in the legal document.
Health Care POAs – They are governed under the South Carolina Health Care Power of Attorney Act and allows the agent power holder to make all health care decisions for the principal so long as the principal is unable to make their own health care decisions. This includes but is not limited to end-of-life-decisions and life-sustaining procedures. Health Care POAs interact with Living Wills in that it provides instructions for health care decisions in advance of the principal’s incapacity

Declaration of Natural Death/ Living Wills

They allow people to provide health directives in their final phase of life. Individuals can decide if they want life-sustaining measures (feeding tube and hydration) once they have reached a point of incapacity. This is a decision many people make themselves so that their loved ones don’t have to.

Trusts

They are great tools designed to give you total control over your assets and how they are used when you are gone. The South Carolina Trust Code, sections 62-7-101 to 62-7-1106 of the South Carolina Code Annotated, governs South Carolina Trusts. There are various types of trusts, so it is important to understand your options before drafting trust documents.

Titling Cars, Boats, and RVs

When titling personal property, you should title it in either your name or your spouse’s name. If not, if either of the persons listed passes away, it will have to go through probate.

Codicil

This is essentially an amendment to a will. The same formalities as an original will must be followed. A will can be changed (or amended) any time before death or incapacity of the testator. If too many changes are made, a new will might be best to avoid confusion.

What is Probate?

It is an official process overseen by the court to ensure the proper transfer of the deceased’s assets. Probate is often divided into a three-step process that includes opening an estate through the court and administering the patrimony and heritage through a personal representative. Once all debts have been satisfied and the belongings and fortune haves been properly distributed, the estate can finally be closed.

Probate Assets v. Non-Probate Assets

Probate Assets:

Any asset that the decedent owned solely. This can include:

Real estate
Personal items such as clothing or jewelry
Cars
Bank accounts
Shares in a business
Securities, bonds, and other financial assets

For example, Anna has passed away and has left a large estate to her husband and kids. Among Anna’s belongings is an emerald ring that her mother gave her. This ring would be considered a probate asset because Anna owned the ring outright.

Non-Probate Assets:

These are wide-ranging and are identified by the South Carolina Probate Code. Here are a few examples:

Retirement accounts such as a 401k or IRA,
Pay on death bank accounts
Real property owned with right of survivorship,
Joint bank accounts
Asset held in a living trust or revocable trust

Returning to the example of Anna, she and her husband shared a joint account to pay for household bills. After her death, Anna’s husband would be entitled to the entire balance because the account was jointly owned and therefore is considered a non-probate asset.

Knowing what constitutes a probate asset will lend itself to another example of a typical estate. For example, suppose David has an estate consisting of a house owned with his wife titled with the right of survivorship language, a 401k, a family business, life insurance, over $500 thousand in stocks, and numerous rental properties. You may wonder how this estate would be settled if David passed away without a will, so here is a quick analysis.

*Disclaimer – This is not legal advise. This is basic information. Each case varies based on the individual facts. For specific legal advise, please contact an attorney.*

[i] In Watson v. Underwood, the grantor, Watson, gave a POA to her son to prevent her daughter and husband from inheriting any of her estate through her will, intestate succession, or elective share. 407 S.C. 443, 450, (App. Ct. 2014). In this case, Watson became incapacitated and the agent of the POA created an irrevocable trust for Watson, which was permissible even though the POA granted never specified how to distribute the assets to the trust. The court in Watson held that so long as the trust did not impede on Watson’s right to create a will or modify her current will, then the POA to create a trust was valid.[i]