September 2, 2015

ESTATE PLANNNING: SIMPLE WILL VS. LIVING TRUST

 

Estate-PlanningEstate Planning Series

Part III: Simple Will vs. Living Trust

One of the most common questions estate planning clients ask is whether or not they need a Trust or a Will. As with most client legal questions, of course, the typical “lawyer” answer still applies: it depends.

Every individual and family has a different set of facts and circumstances. For some, having a Revocable Living Trust Agreement as the cornerstone of their estate plan, paired with a Pourover Will, might best suit their needs. For others, a simple Will can accomplish everything you want.
Before we get into the pros and cons, it is important to understand a basic definition of each:

A Will is a document that takes effect when an individual dies and it dictates how to distribute that individual’s property. It essentially provides a set of instructions for administration of your estate to the probate court.
A Living Trust is a document dictating how you want your property distributed for your benefit when you are unable to care for yourself, and how you want your property distributed upon your death.

WILL

Advantages:
• Simplicity
• Less expensive to create than a Living Trust

Disadvantages:
• Does not avoid Probate, which can be…
o Costly, depending on the value of probate assets;
o Time-consuming, generally taking a minimum of one year for estate administration
o Public (the Will and all related documents filed with the Court are public record)
• Easily contested (when compared to a Living Trust)

LIVING TRUST

Advantages:
• Flexibility
o An individual has much more post-death control over their assets, such as dictating requirements for beneficiaries to receive certain benefits.
• Certainty
o Since a Trust is created and funded during your lifetime, it is much more difficult to assert upon your death that the terms of the Trust do not express your desires.
• Sharing of Enjoyment
o Trusts allow for lifetime use and enjoyment for one beneficiary, with the remainder passing to others after the first beneficiary’s death.
• Probate Avoidance
o If an individual has multiple parcels of real property, deeding that land to the Trust can avoid the necessity of probate in another state.
o Assets titled and owned by the trust become non-probate assets, and bring down the costs of probate – often avoiding the process altogether.
o The terms of a Trust do not have to be recorded or filed of record, providing privacy and confidentiality to the drafter.

Disadvantages:
• Complexity
o Paperwork on the front end (transferring properties, accounts, etc.) can often make the creation of a Trust more burdensome and complex
o Management of assets by a Trustee (both before and after the death)
• More expensive to create than a simple Will

While it may seem that Living Trust-based planning offers more advantages than Will-based planning, in reality everything depends on an individual client’s circumstances, wants and needs. It is also important to remember that a Living Trust is not the only avenue for probate avoidance. Titling real property, bank accounts, vehicles, and other assets with survivorship rights or paid-on-death beneficiaries allow an individual to have direct control over the distribution of those assets without probate involvement.

Additionally, if probate avoidance is not a primary goal, but an individual still wishes to have gifts to others, young children for example, held in trust after the individual’s death, a testamentary trust can be created in the Will itself.
Regardless of your circumstances, having a plan in place is essential. A conversation with a South Carolina licensed attorney is the perfect place to start in determining what documents are best suited to your needs.brad_maxwell_img

Attorney Brad Maxwell

July 23, 2015

Estate Planning: The Probate Process

 


Estate-Planning
Estate Planning Series

Part II: The Probate Process

Oftentimes the first step in planning for any situation is understanding what happens when you fail to plan. In South Carolina, as in most states, the Probate Code was drafted to “simplify and clarify the law concerning the affairs of decedents…” and to “discover and make effective the intent of a decedent in the distribution of his property.” (S.C. Code 62-1-102)

While not all of us may get in a car accident, break the law, or find ourselves in a nasty divorce battle, each and every one of us will cash in our chips one day. Consequently, it’s important to have a basic understanding of the probate process and what the court may require of your loved ones when you have passed. Below are some of the common probate questions asked by clients. As with most things, there are always exceptions. It is important to consult with a licensed South Carolina attorney if you have specific estate planning or probate questions.

1. When is Probate required?
At its core, Probate serves to determine ownership of our assets after we have died. Assets that pass through Probate are fittingly called probate assets, while assets that pass outside of probate are non-probate assets. If it can legally be determined who owns an asset, without the authority of the Probate Court, then it is likely non-probate. Such assets might include a life insurance policy with a paid-on-death (POD) beneficiary, a bank account held jointly with a spouse, or real estate titled jointly with a right of survivorship.
Consequently, if a decedent’s assets are all non-probate, no South Carolina probate administration is required.

2. Testate v. Intestate
You have determined there are probate assets, and therefore probate administration is required; but who gets to decide who gets what?
If a loved one has died testate, leaving behind a validly executed Will, that document governs. Accordingly, his or her last wishes for the distribution of their property are followed.
However, if a loved one has died intestate, without a Will to control the distribution of assets, then the Probate Code fills in the gaps with intestacy law. If you leave behind a spouse and children, 50% of probate assets are given to the spouse and the remaining 50% is split equally among the children. If you leave behind children and no spouse, 100% of probate assets are split equally among children. If you leave behind no spouse or children, 100% of probate assets are left to surviving parents; if no surviving parents, then surviving siblings, etc.

3. What is needed to open Probate?
An original death certificate, an original Will (if there is one), and names and addresses of all family members – even those not named in the Will.

4. What does a Personal Representative do?
The Personal Representative (PR) is the individual charged with administering the estate in probate court. If no Will is left appointing an individual of the decedent’s choosing, the court will make its own nomination and appointment.
The job of a PR is often daunting, and he or she can be held personally responsible if the funds and assets of the estate are not properly handled. Among other things, the PR is responsible for sending various notices to heirs and devisees of the estate, filing an inventory of estate assets, and filing tax returns on the decedent’s behalf.

5. How expensive is Probate?
Probate court costs vary widely, as they are largely determined on the value of probate assets. Some of the potential Court costs associated with administering an estate include publishing Notice to Creditors in the paper, initial filing fees, and fees paid upon filing of the Inventory. An uncontested estate with a total probate value of $500,000 results in a payment of probate fees of approximately $700. It is not Court fees that are expensive – it’s the attorney’s fees and the other court costs that arise if probate becomes complicated.

6. How long is Probate?
From start to finish, probate administration generally takes from nine months to a year. A creditor has eight months from the date of publishing the Notice to Creditors to file a claim. After this claims period has expired and any claims have been resolved, the necessary paperwork to close the estate can be filed.

7. Can and how do I avoid Probate?
This is a question answered best by your estate planning attorney. Executing a Will might not keep your loved ones out of Probate, but it will drastically reduce the costs and complexity. Steps to avoid probate altogether can include creating a Living Trust, titling assets with survivorship rights or POD beneficiaries, and planning to address family dynamics. The costs to set up a Trust are greater than a Will, but could save you and your family money in the long run.

Lastly, it is important to understand that while good estate planning can eliminate many burdens of the probate process, nothing can change the Court’s requirements for probating an estate.brad_maxwell_img

Attorney Brad Maxwell

In my next blog, I will address some of the basic advantages and disadvantages of a “simple” Will and a Revocable Living Trust Agreement (RLTA), and why drafting either are better than nothing at all.

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