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 help ensure they are honored. However, creating and ensuring they are legally sound can be challenging and overwhelming.
While it’s best to consult an estate planning attorney, 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 the event of incapacity, and after they pass away.
The Importance of Estate Planning
Beyond managing and distributing assets, a robust estate plan is crucial for helping to protect your loved ones and ensure their well-being. Leveraging the proper vehicles can enable 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.
Wills, Trusts, and Estates: Legal Instruments for Estate Planning
Two primary legal instruments in estate planning are wills and trusts.
The Last Will and Testament: What Is a Will?
Commonly known as a will, this foundational legal document in estate planning outlines how you want your assets distributed after you pass away. Creating a will can allow you to maintain control over your legacy and make things easier for the people you care about. Your will can determine:
- Beneficiaries for specific assets
- Guardians for your minor children
- A representative to administer your probate estate and execute your wishes according to your will
Following your passing, your assets will go through probate, a court-supervised proceeding that validates the will, accepts its terms, and distributes 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 a full probate to be settled.
After the will is validated, the executor named in the will can proceed with administering the estate and carrying out the instructions mentioned in the will.
Key Functions of a Will
In terms of your estate planning, a will serves several critical functions:
- Naming Asset Beneficiaries: Your will identifies who should receive your assets, such as family members, friends, or charitable organizations. This helps ensure your belongings go to the right people and avoids disputes or confusion.
- Appointing an Executor: They will manage and settle your estate according to your will. Before they can distribute your assets, they may need to settle your debts and other liabilities before they can carry out the terms of your will.
- Designating Guardians: If you have children under 18 or dependents who require ongoing care, your will can contain the names of someone you trust to take legal responsibility for them. Otherwise, the court will decide on their guardian, which may not align with your wishes.
- Resolving Liabilities: This directs how to resolve debts, taxes, and any final expenses. Careful planning can help ensure beneficiaries receive their full inheritance with minimal complications.
Legal Requirements for a Valid Will in SC
South Carolina has specific requirements for a will to be legally valid:
- Age and Capacity: You must be at least 18 years old and of sound mind when making or amending your will.
- Written Document: South Carolina does not recognize oral wills, so you must have your will in writing.
- Signed by the Testator: You must sign the will yourself.
- Witnessed: Two uninterested individuals who are not beneficiaries of your will must witness the signing.
What Happens If I Die Without a Will?
If you pass away without a will in South Carolina, the state’s intestacy laws will apply by default. This means asset distribution will prioritize your closest relatives, starting with your spouse and children:
- If you have a surviving spouse and no children, the surviving spouse will inherit everything.
- If you have children, your spouse will receive half of your estate while your children split the other half.
- If you have neither children nor a spouse, your parents will inherit your property.
The court will continue to look for other relatives based on the degree of consanguinity, and the nearest relative will inherit your estate. If there are no living relatives, your estate will return to the state.
Unfortunately, this means that non-familial relationships, such as lifelong friends, business partners, stepchildren who aren’t legally adopted, and unmarried partners, don’t have a right to inherit your assets unless specified in a will.
What Is a Trust and How It 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 and pass on their wealth to their desired beneficiaries.
Trusts are often used for:
- Avoiding Probate: Assets in a trust can bypass probate. This is beneficial if you want this trust to cover medical, funeral, or any other ongoing expenses.
- Managing Complex Assets: Some assets, such as real estate holdings or investment portfolios, can be left in trusts to be managed by experienced financial managers. This would allow your loved ones to benefit from the income without the burden of asset management.
- Providing for Minors and Dependents: Minors can’t legally inherit property outright, and individuals with special needs may lose government benefits if they receive a direct inheritance.
- Controlling Asset Distribution: Instead of providing the entire inheritance to beneficiaries outright, you can set specific terms for how beneficiaries receive their inheritance and when they are able to gain control. This helps prevent irresponsible spending and supports long-term financial stability.
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. Consulting an attorney can help you understand if an irrevocable trust is right for you.
Wills vs. Trusts: Which One Do You Need?
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.
| Will | Trust | |
| Goes through probate? | Yes | No (if properly funded) |
| Effective when | After death | Immediately upon creation |
| Public or private | Public record | Private document |
| Controls asset timing | No (lump distribution) | Yes (can restrict control) |
| Guardian appointment | Yes | No |
Most benefit from having both a will and a revocable living trust in their estate plan. A will can cover basic wishes and guardianship, while a trust can manage assets more efficiently and privately. An estate planning attorney can leverage either or both to help secure your assets.
How They Relate to Probate
Probate proceedings typically take at least a year and sometimes more, 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 helping to ensure privacy.
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 do not levy either a state inheritance or estate tax. However, it’s worth noting that estates are still 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 the taxes imposed by that state.
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 can help avoid probate in multiple states and helps ensure 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.
Common Mistakes To Avoid With Estate Planning, Wills and Trusts
Proper estate planning with wills and trusts can help secure your assets for those you’re leaving behind. Working with experienced estate planning attorneys can help you avoid the small mistakes that can create big problems.
Some of the most common errors in estate planning can include:
- Having No Plan: Without a will or trust, the state decides who inherits your assets.
- Failing to Update Documents: Major life events like divorce, remarriage, or the birth of a child should trigger a review of your estate plan.
- Naming the Wrong Executor or Trustee: Choose someone responsible, trustworthy, and able to objectively carry out your wishes.
- Overlooking Beneficiary Designations: Assets like life insurance and retirement accounts pass outside of your will. Be sure they’re aligned with your overall plan.
- Not Funding Your Trust: A trust only works if assets are transferred into it. Otherwise, they may still go through probate.
Working With an Estate Planning Attorney in South Carolina
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.
Best of all, they offer a personalized approach, tailoring your plan to your unique situation. Through their experience, they can help you navigate the legal intricacies of estate planning and help ensure your estate plan meets your specific needs and stands up to legal scrutiny.
Creating a will or trust isn’t just about filling out forms — it’s about understanding your goals, protecting your assets and providing for the people you care about. That’s where Wiles Law Firm comes in.
As an experienced estate planning law firm, we understand will and trust laws and help individuals and families:
- Choose the right estate plan for them
- Minimize estate taxes and court involvement
- Protect assets for future generations
- Address special circumstances, like blended families, or special needs
- We take the time to get to know you, then craft a custom estate plan that reflects your wishes and complies with South Carolina law.
Leave the Best Gift for Your Loved Ones With Wiles Law
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 estate planning lawyers 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.