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Bluffton South Carolina Estate Planning Law Blog

Tips for choosing a trustee

A trust can be a powerful tool in an estate plan by protecting assets from creditors or in a divorce. When shares of a family business are placed in a trust, the voting rights are held by the trustee instead of the beneficiaries. This may help ensure that votes are made with the good of all beneficiaries in mind instead of the self-interest of just one person. Some people in South Carolina may want to build their estate plan around a trust, but it is important to have the right trustee.

People often default to appointing a spouse. However, a spouse who is close in age might become incapacitated or die soon after. A spouse could be unduly influenced by some family members. Or, the spouse could remarry, and the assets in the trust might pass to the new spouse's family. In a blended family, appointing a spouse as trustee could create a rift with the stepchildren and end up in litigation. Some of the same dangers could arise if an adult child is appointed as trustee. The child might simply have no interest in acting as trustee.

Why a trust may be a better option than a will

South Carolina parents who are creating an estate plan might want to consider using a trust instead of a will. A trust can offer a number of advantages and give a parent more control over how his or her assets are distributed.

A trust may be revocable or irrevocable depending on its purpose. Unlike a will, a trust is private, and assets from a trust may be distributed immediately instead of going through the probate process. However, one advantage of a trust is that assets do not necessarily have to be distributed right away, and, in some cases, it might be created to prevent this. Even adult children may be too immature to manage a large inheritance, so the trust might be set up so that they do not get a distribution until later. Alternately, they might receive small distributions at certain intervals. If the child has issues with creditors, the trust can keep assets protected from those creditors.

Estate plans that should be updated

People in South Carolina who fail to regularly review their estate plan may do so for various reasons. They may be reluctant to talk about death or may be intimated by the complex documents or tax laws. However, an estate plan that is not properly up to date may not be efficient enough to ensure the assets of an estate are distributed as preferred by the estate's owner.

One indication of an inadequate estate plan is that important documents are missing. The most basic estate plan should include a will, an advanced medical directive, a financial power of attorney and a will. All of these documents should be evaluated by an attorney within the last decade and immediately after all major life events.

Advantages of a revocable trust

For fairly straightforward estates, a last will and testament may be sufficient for passing assets on to beneficiaries. However, some estate owners in South Carolina might want to consider a living trust, also known as a revocable trust. This estate planning vehicle has a number of advantages for people with larger estates or more complicated financial or family situations.

The estate owner retains control over the trust and the property that is placed in it. Property can be moved in and out of the trust without penalty. With a trust in place, the probate process can be largely avoided. Probate can be expensive and time-consuming, but one of the biggest advantages of avoiding probate with a trust is that it makes the estate plan private. Family members may use the details of an estate plan they are able to see as it passes through probate to challenge it.

Reasons adults need an estate plan

The American Association of Retired Persons reports that around half of adults do not have an estate plan, and some people in South Carolina may be part of that percentage. Individuals might not have a plan because they think they are too young, have too few assets or do not have family, but there are a number of reasons to create an estate plan.

Most people want some kind of control over their medical care if they were to be incapacitated. A living will that addresses a person's wishes for end-of-life care and a power of attorney that appoints someone to make medical decisions on that person's behalf can ensure some of this control. A financial power of attorney can appoint someone to take financial and legal action for the person.

How to choose the right people for roles in an estate plan

When a South Carolina resident is creating an estate plan, there are many specifics to consider. For example, it's important to choose the right people for estate planning roles. One common problem is that multiple people may be appointed for responsibilities that overlap. This and other errors may cause conflict.

The many different roles that may exist in association with an estate plan include executor, trustee, agents for financial and medical decisions, agents for funeral decisions, financial account designees, long-term care insurance lapse designee and Social Security representative payee. These multiple and sometimes conflicting roles tend to arise when arrangements are made at different times throughout the estate owner's life. Therefore, one step in revising an estate plan may be to look at these roles and see which ones can be combined.

Informing a child about their trust

When parents or grandparents in South Carolina create a trust for a child, they often wonder if they should tell them about it. Many of these children won't see the benefits of the trust for many years, but even the knowledge of the benefits may affect their behavior. The creator of the trust may have concerns that the beneficiary will lose ambition or feel entitled. Conversely, they don't want the child to be worried about their financial future.

In some jurisdictions, the grantor doesn't have any legal way to prevent beneficiaries from learning about a trust, even if they're children. Some states require that beneficiaries be reasonably informed about their trusts so that they have the chance to protect their interests. They usually have the right to access an annual accounting statement. Some information may be restricted before the age of 25.

How to create an estate plan in the new year

The first month of the year is a great time for South Carolina residents and others to get their lives in order. For example, it can be a great time to create a savings account or finally get serious about meeting fitness goals. It can also be a great time to get serious about creating an estate plan. Ideally, a plan will include a will that dictates where assets go after a person dies.

It can also determine who has guardianship of any minor children a person has. Without a will, state law may decide where assets go, and these beneficiaries may not be the ones an individual had in mind. Individuals can also benefit from buying an insurance policy that will provide surviving family members with income. The amount of coverage a person should buy will depend on his or her income and other financial needs.

Using multiple trusts in estate planning

When people in South Carolina think about planning for the future, they may wonder about the opportunities provided by instruments like trusts, which can be flexible and offer additional control. In addition to a will, many people opt to create trusts, especially if they want to pass property to minor relatives or otherwise direct a more complex distribution that may be possible in a will. After a trust has been established, people may wonder if they can make a second or additional trust.

A trust only manages the distribution of property that has already been assigned to it. Therefore, if people want to distribute that property differently than how it was designed in the original trust, they can make an amendment to change the trust document. In addition, if they want to completely replace the text of the original trust, they can create an restatement. Of course, as long as the trust is revocable, the creator can also revoke it and later create an additional document. In many cases, people can address their concerns through some form of an amendment.

Trusts serve many purposes but require competent management

Current federal tax laws have eliminated most of the need to use trusts to transfer assets because inheritance tax exemptions currently stand at $11,180,000. Although wealthy families in South Carolina might have few concerns about federal taxes at this point, trusts still offer significant benefits to people who want to exert control over the distribution of funds and keep wealth within a family.

By placing assets within in a trust instead of directly distributing inheritance to heirs, people could protect beneficiaries from outside claims on the money. A trust might prevent creditors from seizing funds or shield the money from a divorcing spouse. The terms of a trust could also impose rules that limit an heir's vulnerability to financial exploitation or poor personal decisions. A beneficiary with special needs might still qualify for government benefits while still accessing an inheritance held in trust.

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