Prepared. Aware. Ready.
February 2020 Issue
By Catherine Scarminach, Esquire
Many people think estate planning is only for the wealthy or elderly, but the truth is everyone has an estate; and no matter how large or how modest, how old or how young, you can’t take it with you when you die. An estate plan helps ensure that your wishes for yourself, your family and your assets are carried out in the event of your illness or death.
Estate planning is the process of anticipating and arranging for the disposal of one’s assets. Modern estate planning also protects your estate in the event of incapacity. Common estate planning tools include Wills and Trusts, Beneficiary Designations, Durable Powers of Attorneys and Health Care Powers of Attorney.
A Last Will and Testament is one of the most basic tools, and it’s one that many people are familiar with. A Will allows you to provide instructions for the distribution of your property at death, and names one or more persons to manage your estate until final distribution. If you are the parent of a minor child, a Will also provides the opportunity for you to name a guardian.
Although a Will is the cornerstone of estate planning, some people may need something more extensive, and, if so, a trust may beneficial. Trusts also specify how assets should be distributed, but with important advantages. Unlike wills, a trust is effective immediately upon the execution of the document and can remain in effect after your death. Therefore, a trust can account for your incapacity and the incapacity of any beneficiary, and can also protect the assets from beneficiaries’ creditors, spouses and irresponsible spending. More importantly, trusts are not subject to probate, so assets can go immediately to your heirs without the need for court approval and the administration of your estate can remain private.
It is important to realize that not all of your assets will pass to your survivors through a Will or a Trust. Payable on-death (POD) and transferable on death (TOD) accounts and any accounts with a beneficiary designation will pass directly to the beneficiary you name in the financial institution’s beneficiary designation forms without having to go through probate. Similarly, any property that is jointly owned automatically passes, without probate, to the surviving owner(s) when one owner dies.
Just as an estate plan allows you to control what happens to your property after you die, it also allows you to protect yourself in the event you lose capacity. A durable power of attorney for finances gives a person of your choosing (the agent) the authority to handle financial decisions on your behalf should you become incapacitated. A Health Care Power of Attorney provides a way for you to appoint someone to manage your health care needs and decisions when you cannot communicate your wishes to your doctors and your health care providers. In South Carolina, this document also includes your end of life directives. Absent these powers of attorney, a court may be left to decide what happens and who will control your assets and health care if you are found to be mentally incompetent. The court’s decisions may not be what you wanted.
None of us look forward to thinking about loss of life, or the possibility of being unable to make decisions for ourselves, or care for those we love. It is common to feel intimidated by the complexities of estate planning and being forced to make difficult decisions before you are ready. However, leaving unanswered questions about how to settle your affairs can make life for those we love even more difficult. This is why answering these questions now and formalizing an estate plan is an important step that shouldn’t wait.
A native of Hilton Head Island, Catherine A. Scarminach is an Associate with the Novit & Scarminach, P.A. and primarily practices Residential Real Estate, Estate Planning & Probate Law.