A widespread misconception is that estate planning is only for those with large estates. The reality is that any individual who wishes to protect their assets and secure their family’s future should have an estate plan.
Estate planning vehicles like wills and trusts document your final wishes and instructions to ensure they are honored. However, creating and ensuring they are legally sound can be challenging and overwhelming.
While it’s best to consult a lawyer for wills and trusts, it also helps to understand what you’re about to undertake. This comprehensive guide delves into the intricacies of estate planning, wills and trusts in South Carolina to help you start on the right track.
What Is Estate Planning?
Estate planning involves arranging for the distribution of a person’s estate, including both real and personal property, during their life, in case of incapacity, and after they pass away.
The Importance of Estate Planning
Beyond managing and distributing assets, a robust estate plan is crucial for protecting your loved ones and ensuring their well-being. Leveraging the proper vehicles enables you to provide financial support for your family members without exposing them to overwhelming tax burdens.
Best of all, a well-thought-out estate plan details how assets are to be distributed and provides instructions for your health care in the event of your incapacity. This can significantly ease the emotional and financial stress on your loved ones and prevent potential conflict among them.
Legal Instruments for Estate Planning
Two primary legal instruments in estate planning are the Last Will and Testament and Trusts.
The Last Will and Testament
Commonly known as a will, this foundational document in estate planning lets you outline how you want your assets distributed after you pass away, allowing you to provide for your spouse, children or other loved ones.
A court-supervised proceeding called probate occurs after the testator (the person who wrote the will) has passed away to validate the will, accept its terms and distribute the assets included accordingly. Estates worth less than $25,000 may qualify for a quicker and cheaper process than the regular probate proceedings. However, estates worth any more than that must go through probate to be settled.
After the will is validated, the executor named in the will can proceed with wrapping up the estate and carrying out the instructions mentioned in the will.
Dying Without a Will
If you pass away without a will in South Carolina, your property will be distributed by the probate court according to state intestacy laws. These laws prioritize your closest relatives, starting with your spouse and children.
If you have a surviving spouse, they will inherit everything unless you have children. If you have children, your spouse will receive half of your estate while your children split the other half. Your parents will inherit your property if you have no spouse or children.
The court will look for other relatives if you have no surviving spouse, children, or parents. Based on the degree of consanguinity, the nearest relative will inherit your estate. If there are no living relatives, your estate will return to the state.
Trusts and How They Can Help
A trust is a versatile estate planning vehicle facilitating the private management and transfer of wealth. They offer individuals the flexibility to manage their estate, protect assets and pass on their wealth to their desired beneficiaries.
Two Main Types of Trusts
1. Revocable Living Trusts
Revocable trusts are living trusts that allow you to retain control over assets in them until you pass away. You can change the terms of the trust, add or remove assets or even nullify the trust if necessary.
However, assets in a revocable trust are still considered part of your estate. This means that, upon distribution, your beneficiaries may still have to pay applicable estate taxes.
2. Irrevocable Trusts
An irrevocable trust cannot be changed or revoked by the grantor. Typically without court modifications, the grantor loses control over the assets once they are placed in the trust. While this may seem a disadvantage, it offers tax planning and asset protection benefits. Assets in an irrevocable trust are no longer part of your estate, so they won’t be subject to estate taxes when you pass away.
However, note that creating one may not be worth it for those with estates not exceeding the tax exemption amount. Enlisting wills and trusts services and consulting an attorney can help you understand if an irrevocable trust is right for you.
Wills vs. Trusts: Pros and Cons
Creating an estate plan is essential for asset protection and family planning. A will or a living trust can be used for this purpose. Both documents allow you to name beneficiaries and change terms during your lifetime. However, there are significant differences between the two.
How They Relate to Probate
Probate proceedings can take several months to years, depending on the size and complexity of an estate, delaying the distribution of property to beneficiaries. They also often involve substantial costs, including attorney, executor and court fees.
Using a living trust can bypass probate and allow for swift asset distribution, reducing stress for your loved ones and ensuring privacy.
With that said, South Carolina has adopted the Uniform Probate Code, which simplifies its probate procedures compared to many other states. It ultimately makes probate in the state more manageable.
Privacy
Wills become public records during probate, making them accessible to anyone who wishes to see them. In contrast, trusts remain private documents, with details known only to the successor trustee and beneficiaries. This makes a living trust more suitable if privacy is a priority.
Estate Planning Wills and Trusts in South Carolina: Other Considerations
Tax Implications
South Carolina is one of the 38 states that does not levy either inheritance or estate tax. However, it’s worth noting that estates over $13.6 million ($27.2 million for couples) will be subject to federal estate taxes. Additionally, if you inherit an estate from an individual residing in a tax-imposing state, you will be responsible for paying those taxes.
Passing on Real Estate in Multiple States
Owning property in multiple states complicates estate planning. A living trust may be pricier than a will, but it avoids probate in multiple states and ensures your beneficiaries receive your out-of-state real estate according to the trust’s terms.
Leaving a Property to a Minor
A wise strategy to leave a property to a minor is to place it in a trust under the supervision of a trustee until the child reaches legal age. A trust can safeguard the minor’s interests and ensure responsible management of the property until they reach adulthood.
How a Lawyer for Wills and Trusts Can Help
While it is technically possible to compose a will without legal assistance, consulting a lawyer for wills and trusts in South Carolina can prove invaluable. They can guide you through creating a will and help you avoid common mistakes like improper signing or witnessing.
Best of all, they offer a personalized approach, tailoring your plan to your unique situation. Through their expertise and experience, they can help you navigate the legal intricacies of estate planning and ensure your estate plan meets your specific needs – and stands up to legal scrutiny.
Leave the Best Gift for Your Loved Ones With Wiles Law
Knowing the difference between a will and a trust is crucial for estate planning. A will distributes property to beneficiaries after death, while a trust transfers property to an account managed by someone else.
Those with complex estates may find a living trust useful. However, the adoption of the Uniform Probate Code in South Carolina means most people probably won’t need one. Nevertheless, enlisting wills and trust services from an experienced attorney can help you choose the best legal instrument for you.
Whatever vehicle you choose, crafting a robust estate plan is a thoughtful gift to your loved ones and a crucial step in securing your legacy. If you are ready to take the next step, Wiles Law’s wealth preservation planning experts are here to help. Whether creating an estate plan or updating an existing one, call us at (843) 718-0232, and we’ll help you get started.