Law Office of Gem McDowell, P.A, Author at Gem McDowell

Invoice Factoring and the Associated Receivables Funding v. Classic Case

We covered invoice factoring – the good, the bad, and the predatory – in a previous blog. Below, we’ll look at one of the rare cases involving invoice factoring to make it to the high courts, the 2024 South Carolina Court of Appeals case Associated Receivables Funding, Inc. vs. Classic Industrial Services, Inc. (find it here, PDF).

Businesses who work with factors should be aware of this case because it answered two questions:

Does an invoice have to be paid once it’s certified? and
Is the customer bound by all the terms of the factoring agreement between the factor and the vendor?

Let’s dive in.

Background: The Associated Receivables Funding Case

As a quick reminder, in invoice factoring, there are three parties:

The customer who obtains products or services from the vendor
The vendor who provides products or services to the customer and creates an invoice, which it then sells to the factor
The factor who buys the unpaid invoice (receivable) from the vendor and collects payment from the customer

In this case, the parties are:

The customer: Classic Industrial Services (Classic)
The vendor: Dunlap, Inc. (Dunlap)
The factor: Associated Receivables Funding, Inc. (ARF)

ARF had an agreement (the Factoring Agreement) executed under South Carolina law with Dunlap in which ARF would provide Dunlap funding in exchange for receivables. Starting in spring 2014, ARF began purchasing receivables in which Classic, who had hired Dunlap as a subcontractor, was the customer.

For the next two years, the arrangement worked as it should. Classic paid ARF on at least 40 Dunlap invoices totaling over $1 million without issue. When Classic received a Dunlap invoice, it completed ARF’s “Work Completion Form” and certified the invoices with language indicating the work had been complete and the invoice was ready to be paid.

Then Classic Stopped Paying

But Classic stopped paying the Dunlap invoices starting in March 2016, believing Dunlap had not paid some of its suppliers. Classic was rightly concerned, because Dunlap’s failure to pay its own subcontractors or suppliers could lead to a mechanic’s lien that could become a big problem for Classic.

Despite knowing this was going on, Classic continued to assure ARF that everything was fine, so ARF continued advancing funds to Dunlap on new receivables. Classic also continued to certify the Dunlap invoices as before.

ARF finally learned in July 2016 that Classic was not going to pay the remaining Dunlap invoices. By the time of the trial, ARF’s outstanding invoices totaled $323,718.31.

ARF sued for repayment.

Yes, Certified Invoices Must Be Paid

In a nonjury trial, the circuit court agreed with ARF, finding Classic liable for payment under three theories:

Under South Carolina Code § 36-9-607 and § 36-9-404, an “account debtor” (Classic) must pay the “assignee/secured party” (ARF) once it receives notice that the “assignor/debtor” (Dunlap) has assigned the right to payment. Classic had an obligation to pay the amount owed under its contract with Dunlap – not under the terms of the Factoring Agreement between Dunlap and ARF. And because Classic certified the invoices as valid and payable, it could not then withhold payment, even for a valid reason.
Under the common law theory of negligent misrepresentation, the court found Classic liable because it knowingly made false statements to ARF, representing that the Dunlap invoices were valid and payable, and ARF relied on this information to continue advancing money to Dunlap.
Similarly, under the theory of promissory estoppel, ARF relied on the false information Classic provided to continue advancing funds to Dunlap.

The appeals court agreed with the circuit court on the first and second points, declining to discuss the issue of promissory estoppel because it was not necessary.

No, the Customer Is Not Bound by All the Terms of the Factoring Agreement

Importantly, the appeals court disagreed with the circuit court on one issue: the rate of interest applied to the outstanding amount.

The circuit court had imposed a rate of 24.64%, as specified in the Factoring Agreement – but Classic was not a party to that agreement. While Classic was bound to the assignment of the right to pay in the Factoring Agreement, it was not bound to the rest of its terms. The appeals court directed the lower court to calculate the money owed with the statutory interest rate of 8.75%, rather than the higher rate of 24.64% that Classic was not bound to.

After the decision, both the Respondent (ARF) and the Appellant (Classic) requested a rehearing but were denied by the South Carolina Court of Appeals in September 2024.

A Sidebar: “Should” You Pay the Invoice?

The appeals court takes a moment to discuss the meaning of the word “should” in the context of contract language. When Classic certified the Dunlap invoices, it stated that “complete payment should be processed.” (Emphasis added)

Does “should” carry the connotation of obligation or discretion in this context? Classic argued that there was disagreement over whether the word “carries the force of a mandate.”

South Carolina courts have not yet ruled on this, notes the appeals court, but cites the Fourth Circuit’s interpretation that “should” on its own “can express the notion of requirement or obligation.”

“We find it problematic to construe ‘should’ as discretionary in the context of processing a payment for work certified to be complete and payable in the course of an ongoing business relationship,” writes the appeals court. “Instead, it seems logical to construe ‘should’ as a requirement or obligation in such a contractual context.”

For Strategic Business Advice to Help Grow and Protect Your Business, Call Gem McDowell

For help with contracts, corporate governance documents, buying and selling businesses, and much more, contact business attorney Gem McDowell. Gem and his team at the Gem McDowell Law Group, with offices in Myrtle Beach and Mt. Pleasant, SC, provide legal services and strategic business advice to help you protect and grow your business.

Schedule your no-obligation consultation today by calling Gem’s office at 843-284-1021 and let us know how we can help.

What is Invoice Factoring? The Good, The Bad, and The Predatory

When a company needs cash fast, one option is to sell its receivables in the form of unpaid invoices at a discount to a third-party business called a factor. The factor collects payment for a fee, and the business gets cash in hand without having to take on debt or put up collateral.

Sounds great, right? Factoring, or invoice factoring, can be a convenient solution to temporary cash flow issues, and many businesses have benefitted from the arrangement. But invoice factoring comes with downsides, even in the best-case scenario, and in the worst case, it can lock businesses into a predatory cycle of low high-interest borrowing and repayment. This is the hidden side of invoice factoring that doesn’t get discussed much.

Below, we’ll briefly look at how factoring works, the benefits and hidden downsides of it, and what to do before working with a factor.

Factors and Factoring: How Invoice Factoring Works

In factoring, there are three parties:

The customer who obtains products or services from the vendor
The vendor who provides products or services to the customer and creates an invoice, which it then sells to the factor
The factor who buys the unpaid invoice (receivable) from the vendor and collects payment from the customer

Here’s how it usually goes. The factor buys the receivable and pays the vendor an “advance” of ~70-95% of the value of the invoice. The factor then gets the payment from the customer. After the customer pays, the factor remits the remaining “reserve” to the vendor, minus a “discount fee,” which is typically 1-5%.

Is Factoring a Standard Business Service or Predatory Loan Practice? Benefits and Risks for Businesses Using a Factor

It can be either, depending on the terms of the agreement and integrity of the factor. We advise businesses we work with to be very cautious before entering into any agreement with a factor. What first seems like a convenient business service can turn out very badly.

Let’s look at the Good, the Bad, and the Ugly of invoice factoring.

The Good: Benefits of Invoice Factoring to Businesses

Factoring as a service has been around for hundreds of years, and many businesses have benefitted from it to maintain cash flow without taking on any debt. It can be especially helpful for businesses with high upfront expenses and long payment cycles (e.g., 60 to 90 days), as it provides cash quick for a relatively low fee when all goes well.

Invoice factoring is also an alternative to traditional financing like a bank loan, which requires collateral. This makes it an attractive option to companies that cannot, for whatever reason, secure a traditional loan.

The Bad: Downsides of Invoice Factoring

Even when all goes well, and the factor is ethical, there can be some downsides for a business working with a factor.

The most obvious downside is the discount fee, which reduces profit margins. Working with a factor can damage customer relations, too, as it can be seen as a sign that the business is struggling. This is an even bigger problem if the factor is rude and aggressive when pursuing payment from the customer. It can deter potential investors or buyers, who may view factoring as a sign the company is struggling to maintain consistent cash flow, or because the agreement between the business and the factor is an impediment to a sale.

Factoring agreements can include restrictive terms, such as guaranteeing exclusivity (not to work with another factor) or requiring the business to sell all of its invoices from a certain customer or within a certain timeframe to the factor. Some agreements include a recourse provision for customer non-payment, which requires the business to buy the invoice back, or replace it with another, if the customer doesn’t pay. Recourse factoring can entail stricter terms, lower advances, and/or higher fees, all of which is bad for the business. It also shifts the risk back onto the business, eliminating one of the benefits of factoring.

The Ugly: The Predatory Side of Invoice Factoring

If you do an internet search for “pros and cons of invoice factoring,” you’ll find many articles and lists with the same benefits and downsides listed above. You are less likely to read about how invoice factoring can damage or destroy a business if it turns predatory. That’s why we’re writing this article; we want more businesses to know the hidden dark side of working with a factor.

Not all factors engage in these kinds of business practices. But some of them do. This is why you should be extremely cautious before signing an agreement with a factor.

Unethical factors often advertise low discount rates (1-2% or so) but charge many high fees on top, such as application fees, early termination fees, wire/ACH transfer fees, invoice processing fees, monthly maintenance fees, service fees, attorneys’ fees, and more. All these fees add up and can drastically reduce profit margins. For example, unethical factors often impose excessively high late fees for customer late payments that increase quickly with time. It’s not uncommon to see late fees that reach an effective APR of 30-50%.

Unethical factors can lock businesses in long term through restrictive terms and high termination penalties that make it difficult for the business to end its relationship with the factor. Businesses just trying to stay afloat can get caught in a cycle of predatory lending and repayment, similar to the way an individual can get caught in a cycle of debt and repayment with payday loans.

Using complex legal language to obfuscate the true terms of the agreement is another tactic we’ve seen used by unscrupulous factors. The agreements leave certain procedures and fees vague, giving the factor an advantage. For example, an agreement that doesn’t provide clear procedures and timelines on calculating a payoff amount can create a situation where the factor intentionally takes a long time to come up with the figure. By the time the business is given a payoff amount, it’s already out of date, as more fees and interest have accrued in the meantime. This is just one example of a tactic that’s technically legal, as it adheres to the terms of the agreement, but highly unethical.

Here’s the bottom line: Ethical factors want to make money by providing great service and maintaining good customer relations. Unethical factors want to make money by locking customers in no matter what it takes. They benefit more by keeping customers in a perpetual borrow-and-payback cycle with high interest rates and hidden fees rather than by providing excellent service.

Is Invoice Factoring Subject to Governmental Oversight and Regulation?

How can a factor get away with some of the business practices above?

In part, it’s because invoice factoring is a self-regulating industry. Factors are not subject to the same regulations and oversight by federal and state government bodies that banks and other loan-making financial institutions are because they are not technically making loans. Instead, the industry has various private associations that set standards and best practices. But those standards are not legal requirements, and membership is voluntary.

Factoring transactions are governed by laws at the state level, specifically Article 9 of the Uniform Commercial Code (UCC), a set of laws that regulates commercial transactions in all 50 states and Washington, D.C. In South Carolina, Title 36, Chapter 9 of the SC Code is based on the UCC Title 9. These laws provide limited protection to businesses that work with factors and to factors themselves.

Before You Try Invoice Factoring

Know what you are doing before entering into an agreement with a factor.

Plan for invoice factoring to be temporary. Do not get trapped long term. Think of invoice factoring as a convenient but temporary solution for cash flow. It’s not a viable alternative to building cash reserves in your business for long-term growth and sustainability.
Research the factor. If possible, get a positive referral from someone you know and trust whose business has similar needs.
Read the terms closely before signing. Look for recourse provisions, extra fees like those listed above, restrictive terms, interest rates, and so on. (Having said this, even a close reading may not be enough to know what working with the factor will be like.)
Speak to an attorney first on invoice factoring. Get advice from a business attorney who has advised businesses working with unethical factors. He or she can help you understand a factoring agreement before signing and/or discuss alternatives to keep your business going. Find someone in your state; if you’re in South Carolina, call Gem McDowell (see below).
Seek alternative financing through traditional and/or private lenders. If you are in need of a temporary solution for cash flow, consider alternatives to invoice factoring like reducing expenses, selling assets, or securing a traditional loan from an institution with more oversight and regulations that protect you.

For Contracts, Business Law, and Strategic Advice to Grow and Protect Your Business, Call Gem McDowell

Contracts are often easy to sign but hard to get out of. Do you know exactly what you’re agreeing to?

Before entering into a contract with a factor, or any other contract, have it looked at by an experienced business attorney like Gem McDowell. With nearly 35 years of experiencing helping South Carolina business owners and professionals, he knows how to protect your interests and avoid mistakes so your business can grow and thrive.

For everything from contracts and corporate governance documents, to buying and selling businesses, to strategic advice to avoid mistakes and help your business thrive, Gem is here for you. Gem and his team at the Gem McDowell Law Group with offices in Myrtle Beach and Mt. Pleasant, SC are here for you – call 843-284-1021 today to schedule your free consultation.

When You Can’t Sell Your Own Property: ROFRs and the Power of Alienation

Is a right of first refusal (ROFR) always a good thing?

No. Many property owners have found out through bitter experience that a ROFR granting another party first dibs to purchase the property can become a big hindrance.

We’ve covered the pros and cons of granting a ROFR to a potential buyer in a previous blog. One big potential drawback for the property owner/potential seller is unreasonable restraint on his or her “power of alienation,” that is, the property owner’s power to freely dispose of the property through sale or transfer.

This was the core issue in the South Carolina Court of Appeals case Crescent Homes SC, LLC v. CJN, LLC (2024) (read it here), which we’ll go into below. It’s an important case that reinforces the need for clear, precise terms for an enforceable ROFR and demonstrates just what can happen when an ROFR becomes an “unreasonable” restraint.

Restraint on the Power of Alienation: Brief Background of the Crescent Case

The Agreement: Develop and Build Lots for Homes

CJN, LLC bought and developed property. Crescent Homes, LLC was a homebuilder.

In 2018, the two parties entered into an agreement (the Agreement) under which CJN would develop 32 lots in Greenville County and sell them to Crescent to build homes on. This was referred to as “Phase 1.” In “Phase 2,” aka “Future Phase,” the plan was for CJN to develop more lots. Crescent would have the right of first refusal to buy those lots.

The Agreement did not contain any specifics on the ROFR, such as price or procedure, and only stated that “A memorandum of such right of first refusal in a form reasonabl[y] acceptable to the Parties will be recorded in the public records of Greenville County at the Initial Closing.” Such a memorandum was never written or recorded with the County, as the parties could not agree on terms.

Third-Party Offers and Crescent’s Response

The project moved slowly, and while Phase 1 was still in progress, CJN received two separate offers to purchase the Phase 2 property. One was for $775,000 in June 2020, and the other was for $1.25 million in April 2021.

Crescent did not accept or refuse either offer. Crescent argued that it was under no obligation to accept or refuse the first offer, as it was made before the Initial Closing (which took place soon after in August 2020). In response to the second offer, Crescent said the ROFR was not triggered because it was not a bona fide offer. Crescent also filed lis pendens (public notice of a lawsuit affecting real property) after each offer.

Still, CJN attempted to find a buyer, listing the property on MLS and the commercial property listing website Costar in May 2021.

Legal Proceedings in Crescent

For details on the various complaints, motions, and lawsuits filed in this case starting in 2019, refer to the court’s opinion. Here we’ll cover only what’s pertinent to our discussion.

In 2021, CJN sought a declaration that the ROFR was void and unenforceable. The master denied Crescent’s motion to dismiss and issued an order determining the ROFR was unenforceable as it constituted an unreasonable restraint on the alienation of an interest in land.

This appeal followed.

Issue 1: Ripeness

First the appeals court addresses the issue of ripeness, or whether the matter was ready to be litigated when the master made his decision.

Crescent argued that the master erred in ruling on the enforceability of the ROFR, as the matter was not yet “ripe” since there were no pending offers on the Phase 2 property at the time. Crescent argued that since the two previous offers had been withdrawn before trial, there was no justiciable controversy.

The appeals court disagreed.

A justiciable controversy must be real and concrete, not hypothetical. The two offers on the Phase 2 Property were real, even if they were no longer pending at the time Crescent took legal action. The court cites previous cases, including Peoples Federal (1989), that found an offer does not need to be pending, saying, “Once a bona fide offer has been made the matter is ripe.” Additionally, CJN listed the property online for sale, which the court says can be interpreted as an offer for sale.

Issue 2: Unreasonable Restraint on Alienation

Next, the appeals court address the main issue: Did Crescent’s failure to either exercise or refuse the ROFR constitute an unreasonable restraint on CJN’s power of alienation?

A restraint on alienation does not automatically make a ROFR void; the question is whether such a restraint is “reasonable” or “unreasonable.” The appeals court cites Clarke v. Fine Housing, Inc. (2023) (read a summary on our blog here) in which the SC Supreme Court examined three factors:

The clarity of what is encumbered;
The price; and
The procedures to exercise the right

While Crescent argued that the lack of specific terms meant the ROFR was not an unreasonable restraint, the exact opposite is true. Looking again at the three factors:

Clarity of encumbrance: The ROFR was not clear about what property it encumbered, as it only mentioned “lots,” but the “lots” did not yet exist
Price: The ROFR contained no specifics on price or how to arrive at a price
Procedures: The ROFR contained no specifics on procedures

The appeals court affirmed the master’s decision, finding that all three factors support the conclusion that the ROFR did constitute an unreasonable restraint on alienation.

Issue 3: Evidence of the Parties’ Conduct and Intent

Finally, the court considers Crescent’s argument regarding the parties’ conduct and intent. Crescent argued that the master should have looked beyond the Agreement itself to the parties’ conduct to supply the missing terms of the ROFR. Even if those terms were not written down on paper, Crescent argues that both parties agreed on some of the basic terms of the ROFR, and the master should have considered that.

The appeals court did not find this argument valid and disagreed with Crescent, again affirming the master’s finding.

Do You Know What You’re Agreeing To?

The ruling is great news for CJN, who can now sell the property on the free market or otherwise dispose of it without restraint. However, CJN could have avoided all the years, stress, and expense of litigation by either 1. not including a ROFR in their agreement with Crescent at all, or 2. drafting a clear, enforceable ROFR in the first place.

Whether you’re the property owner or the potential buyer, you need someone looking out for your best interests with extensive experience. Gem McDowell has over 30 years practicing law in South Carolina and has handled everything from drafting simple deeds to handling multi-million-dollar commercial real estate transactions. He and his team at the Gem McDowell Law Group can help you draft an agreement that’s favorable to you, or review and explain an existing agreement before you sign, and much more.

Schedule your free consultation today by calling (843) 284-1021.

Seller Beware: Think Twice Before Granting the Right of First Refusal (ROFR)

Is it smart to include a right of first refusal (ROFR) clause in a contract? Not always.

If you’re the property owner/potential seller, think twice before including a ROFR in your contract. The ROFR tends to favor the potential buyer while restraining the seller.

Below, we’ll look at what you, as a property owner, should know about the pros and cons of ROFRs, and what makes a ROFR enforceable in South Carolina.

Pros and Cons of the Right of First Refusal (ROFR) for Property Owners/Sellers

We’ve previously covered the basics of the right of first refusal in South Carolina and some of the pros and cons of including one in an agreement. Here’s a quick recap:

The upsides of a ROFR are clear for potential buyers. They get “first dibs” on buying property when it comes up for sale, giving them the opportunity but not the obligation to purchase it.

Property owners, instead, have the obligation to offer the property to the ROFR holder first* without the guarantee the sale will go through, and with a strong possibility that if it does, the final sales price will be lower than what could have been gotten on the free market. For these reasons, a property owner should not automatically agree to a ROFR clause.

* Note that South Carolina courts in recent decisions have not differentiated between the “right of first refusal” and “right of first offer,” and the discussion of ROFR here also includes rights typical of the ROFO.

Here are primary pros and cons from the property owner’s perspective:

Pros:

Having a pre-agreed terms and a potential buyer already lined up could save property owner time, money, and effort when it comes time to sell
Terms of the ROFR could ensure the property does not sell below market value

Cons:

Keeps property owner locked into terms that were likely determined months or years ago, which may no longer be favorable
Often deters third-party bids, which can result in a lower final sales price
Can restrain the owner from selling or disposing of the property entirely

To this last point: A ROFR can act as an unreasonable restraint on the property owner’s “power of alienation” (aka right of alienation), or ability to freely dispose of the property, effectively preventing its sale or transfer altogether. This is the core issue in the 2024 SC Court of Appeals case Crescent Homes SC, LLC v. CJN, LLC. Read more about that case and the court’s decision here on our blog.

Enforceability of Right of First Refusal (ROFR) Clauses in South Carolina

South Carolina courts have routinely ruled that a ROFR is enforceable only when drafted with clear, precise terms that impose reasonable restraints on all parties. In the 2023 case Clarke v. Fine Housing, Inc., the SC Supreme Court laid out criteria for an enforceable ROFR.

An enforceable ROFR should include:

Clear description of the property being encumbered by the right
Terms on price
- A fixed-dollar sales price, OR
- A clear formula to determine a sales price
Terms on procedure
- What event triggers the ROFR
- How notice is given
- How long the ROFR holder has to respond
- What happens if the ROFR holder declines to exercise the right
- The duration of the right

A few things to consider about the duration of the right:

We rarely set forth ROFRs in contracts we draft for our clients here in our practice, but when we do, we make the price extremely clear and always include an expiration date and time, e.g., “This right expires at 11:50 pm ET on December 31, 2026.” An earlier expiration date is generally better for the property owner/potential seller.

If you are the potential buyer, a later expiration date – or none at all – is better for you. Now you can include a ROFR of “perpetual” duration, since the Supreme Court of South Carolina’s January 2026 ruling in the Spring Valley Interests case has conclusively affirmed that the Rule Against Perpetuities (RAP) does not apply to nondonative commercial transfers in South Carolina. This must be explicitly stated in the terms of the agreement for it to be enforceable. (Read more about the Spring Valley case and the RAP here on our blog.) If you are the property owner/potential seller, it’s in your best interest to avoid granting such a right to another party.

Should You Skip the Right of First Refusal Altogether?

If you are the potential buyer, you may benefit from agreeing to a ROFR with favorable terms on price and procedure.

But if you’re the property owner/potential seller, you should strongly consider skipping it, for all the reasons explained above. The benefits, which are small and uncertain to begin with, don’t outweigh the potential downsides, in our experience. If you do want or need to include a ROFR, make sure it’s drafted by an experienced corporate and commercial real estate attorney like Gem McDowell.

For help drafting, revising, or reviewing corporate and commercial real estate documents, call Gem. Gem help business professionals grow their businesses, avoid mistakes, and protect their interests. Gem and his team at the Gem McDowell Law Group serve business owners and professionals across the state from offices in Myrtle Beach and Mount Pleasant, SC. Call today at 843-248-1021 to schedule your free consultation.

What is the “Heirs’ Property Tax Relief Act”? Helping Clear Titles

A new bill to help owners of heirs’ property in South Carolina resolve title issues was signed into law by Gov. McMaster on May 15, 2026. H. 4477 passed unanimously in both the S.C. Senate and the House within the last month and was ratified on May 14.

The widespread support for this bill reflects the growing recognition that heirs’ property – property jointly owned by multiple descendants of the original property owner – is a longstanding problem in South Carolina. The lack of a clear title for heirs’ property frequently leads to both legal complications and family conflict.

Below, we’ll look at what the bill says and does, why heirs’ property is a problem, and whether this legislation can fix it.

What the “Heirs’ Property Tax Relief Act” Does

The “Heirs’ Property Tax Relief Act,” as it’s known, is intended to streamline the process and reduce the financial burden on owners seeking to clear a property’s title.

Beginning with the 2026 tax year, transfers of qualified property to qualified family members will not be considered an “assessable transfer of interest,” and no formal appraisal will be required. Previously, such a transfer would trigger a property appraisal, which could increase the owners’ tax burden.

The Act amends South Carolina Code Section 12-37-3150 and includes the following definitions in subsection (B)(16):

(b)(i) “Heirs’ property” means real property owned by one or more individuals as tenants in common, which was inherited from a relative and for which no formal probate or recorded conveyance transferred clear title to the current owners.

(b)(ii) “Qualified family member” means a person related to the prior owner by blood, marriage, or adoption including, but not limited to, a spouse, child, grandchild, sibling, niece, nephew, aunt, uncle, cousin, or those identified as heir owners by a court of competent jurisdiction.

and the following requirements:

(d) The transfer described in this item is not considered an assessable transfer of interest only if the qualified family members submit affidavits to the county assessor certifying under penalty of perjury that:

The property qualifies as heirs’ property
The transfer is between qualified family members, and
The transfer is for the purpose of clearing title

Once the title is cleared, the property is no longer considered heirs’ property.

Why Heirs’ Property Is a Problem – Consequences of a Cloud on Title

Heirs’ property is created when a property owner dies and the ownership changes but those changes are not properly recorded with the county. It’s often the result of a property owner dying intestate – without a will – but it can also happen if an existing will is not probated. In either case, inheritance is then determined by state law.

Under state intestacy laws, the decedent’s children collectively inherit either 50% of the property (with the other 50% going to the surviving spouse) or 100% of the property (if there’s no surviving spouse). They now own the property in equal, fractional amount as tenants in common. If the situation isn’t addressed, the property can end up with multiple owners with varying ownership interests from different generations.

When changes in ownership are not properly recorded with the county, the result is a “cloud on title,” the legal term for a title with encumbrances or claims. Property without a clear title is:

Difficult or impossible to sell
Unable to get or refinance a mortgage or other home-backed loans
Ineligible for government assistance like FEMA aid
Expensive and time-consuming to fix later on

Those are just some of the legal and financial issues. Heirs’ property often causes family conflict, as well, if there’s no consensus on whether to keep or sell the property, who should live there, who should pay property taxes and upkeep, and so on. As a joint tenant, one owner may sell or transfer his or her fractional interest without the approval of the other tenants, and/or may file for partition, which can lead to a court-ordered sale of the home.

The situation leaves the owners of heirs’ property uniquely vulnerable to financial liabilities, forced tax sales, court-ordered partition, exploitation from speculators, and other risks. The only remedy is to clear the title.

Will This Act Help?

We hope so. In our experience, many heirs’ property owners don’t clear the title because they don’t realize there’s a problem in the first place, and this act doesn’t address that underlying issue. But this act does address an administrative barrier that could hinder heirs’ property owners who have already decided to clear the title, which could help many South Carolina families.

What To Do Now – Clear the Title and Plan Ahead

Heirs’ property is one of the most common results of what we call Family Malpractice™. With some planning ahead and basic understanding of the probate process, you can avoid burdening your descendants with heirs’ property in the future.

Whether you’re dealing with heirs’ property yourself or you want to avoid creating the problem for your descendants, call Gem at the Gem McDowell Law Group with offices in Myrtle Beach and Mt. Pleasant, SC. Gem and his team handle probate matters and help individuals and families develop personalized wills and estate plans tailored to their unique circumstances. Gem’s also a problem solver who understands how family disputes can complicate inheritance and estate planning, and his goal is to help resolve the legal issues while maintaining good family relationships.

Call today to schedule your free, no-obligation consultation at (843) 284-1021. We look forward to hearing from you.

Losing Your Home with One Signature: Home Title Fraud on the Rise and What You Can Do

If you’re like most Americans, your home is your single most valuable asset. Yet you could lose it with just one signature.

This is what happened to Gloria Ormand-Ward, the Appellant in the Court of Appeals of South Carolina case Ormand-Ward v. Litt (2025) (find the PDF here).

Below, we’ll look at how one South Carolina woman lost her home, how it’s possible, and some resources and steps to battle home title fraud (aka deed fraud or home title theft) – including free property recording alerts available in several South Carolina counties.

How an HOA Lien Led to Home Deed Fraud: Ormand-Ward v. Litt

About to Lose Her Home Over Unpaid HOA Assessments

Gloria Ormand-Ward lived in a home (Home) subject to covenants of a homeowner’s association (HOA). In January 2019, her HOA placed a lien against the Home since she failed to pay assessments due. In September 2020, the HOA filed a foreclosure action, seeking $5,526.50 in assessments, late fees, and legal fees.

(Crazy at it may seem, in South Carolina, an HOA can foreclose on a home over outstanding debts, and some HOAs have made quite a good income from doing so. Read more about this here on our blog.)

Getting “Help”

Facing the loss of her house to foreclosure, Ormand-Ward agreed to get help from a man who called himself David Litt and his company Homedebone, LLC (Homedebone). He told her he could handle the situation to prevent her home from being foreclosed on.

In February 2021, Ormand-Ward “purportedly” signed a warranty deed prepared by Homedebone, which transferred the Home to the company for $100. The deed was registered with Horry County soon after. Ormand-Ward also “purportedly” signed a Power of Attorney that appointed Litt as her attorney-in-fact.

The HOA was paid and satisfied. It released the lien and dismissed the foreclosure action.

Suddenly Homeless

This should have been great news for Ormand-Ward – except she didn’t realize, she says, that she had signed away her home. Litt had deceived her.

Homedebone sold the Home to a third party for $260,000 in March 2021, and Ormand-Ward was made to leave. Ormand-Ward, in her late 70s at the time, lived in her vehicle and in homeless shelters over the next few months before being hospitalized due to declining health. She was eventually moved to a long-term care facility.

In November 2021, she brought legal action against Litt and several other defendants. The appeals court affirmed the lower court’s dismissal of the case with respect to one of the defendants, the Chicago Title Insurance Company, but the case with the remaining defendants is still pending.

How This Could Happen – and What Happens Next

Would you ever fall for such a scheme? Maybe you assume it could never happen to you. But you might be surprised at just how easy it is to transfer a home’s title through forgery (when signatures or documents are falsified) or fraud (when deception is used to get a signed deed). Here are just a few legal and procedural factors that may play a part:

No attorney required. A homeowner might reasonably believe that a home could only be sold or transferred with the assistance of an attorney, since South Carolina requires an attorney for real estate closings. But attorneys are not required to draft, review, or approve the signing of a deed.
The county does not verify the transfer. The register of deeds or county clerk will record the deed as long as a deed adheres to South Carolina’s legal requirements (such as notarization and witness signatures). It is not part of the job to verify that the conveyance is legitimate.
Failing to read and/or understand contracts. Many people don’t read what they are signing or fully understand what they are agreeing to. Even with a close reading, someone may not fully appreciate the consequences of signing something like a power of attorney.
Online signature. The appeals court notes that Ormand-Ward signed both the deed and the power of attorney digitally. DocuSign and similar services make it extremely easy to “sign” by typing in your name without reading everything in the agreement.

Can you get your home back after home title theft? It depends in part on whether the deed was the result of forgery or fraud and whether the property has since been conveyed to a bona fide third party. In Ormand-Ward’s case, since she “purportedly” (to use the appeals court’s word) signed the deed herself and the home was later conveyed to a third party who presumably didn’t know about the fraud, she may not be able to get her home back. (Again, the current case did not resolve this issue.)

No matter the situation, a property owner who discovers issues with a home title should contact a real estate lawyer with experience in home deed theft cases.

Home Title Theft – What You Can Do, and Resources

Home title fraud is not as common as some title monitoring companies would have you believe, but it is on the rise, according to the Boston Division of the FBI. Here are some resources and to-dos that can help protect yourself and your home.

Pay debts to avoid foreclosure. A property owner facing foreclosure is more likely to be targeted in deed fraud schemes, according to the U.S. Department of Housing and Urban Development (HUD). So pay your taxes, mortgage, assessments, fees, dues, and other debts to avoid impending foreclosure in the first place.

If you’re already facing foreclosure, or are concerned you will soon, check out HUD’s online resources to help homeowners avoid foreclosure or call 1-888-995-HOPE (4673) to be connected to a HUD-approved housing counselor.

Seek legal advice. Contact an attorney if you’ve discovered issues with your home title, if you’re facing foreclosure, or if you’re asked to sign something, especially if it’s to “avoid foreclosure,” “fix your taxes,” “help with the HOA,” “qualify for assistance,” or something similar. An hour of an attorney’s time could be well worth the cost if it keeps you from making a life-changing mistake.

If an attorney is out of your budget, look for free or low-cost programs and resources. Here are some resources in South Carolina:

The South Carolina Department on Aging provides funds for legal assistance to qualifying individuals aged 60 and older. Toll-free number: 1-800-868-9095
South Carolina Legal Services is a non-profit offering legal advice, assistance, and representation to individuals based on eligibility and type of legal issue. Toll-free number: 1-888-346-5592
Find resources through the South Carolina Bar including the low-cost Lawyer Referral Service (phone number: 1-803-799-7100) and the online program Free Legal Answers.
The South Carolina Legal Resource Finder is an online tool that determines eligibility for programs based on life circumstances and legal situations

Say “I’ll have my attorney look at it.” You can say this anytime someone asks you to sign something, even if you don’t have an attorney and don’t intend on using one. Fraudsters don’t want attorneys involved; if you use this line and get pushback, that’s a red flag that something’s not right.

Monitor your home title. Keeping an eye on your home title can’t prevent transfer due to forgery, but it can help you catch any issue early on so you can take action. Several companies offer home title monitoring for a monthly or yearly fee, often along with other services. Be aware that it’s not possible to “lock” or “freeze” a title to prevent title transfer from occurring; the best these services can do is alert you quickly.

Or monitor your own title for free anytime. Go to the website of your county’s Register of Deeds (or Clerk of Court, in some counties) and search the property records.

Sign up for free automatic alerts. Several counties in South Carolina now offer a FREE automatic alert system that emails you if and when something associated with your name occurs, such as a transfer of your home’s title.

Abbeville County Recording Alert
Aiken County Recording Alert System
Bamberg County Fraud Alerts
Barnwell County Recording Alert
Beaufort County Fraud Alert Update Coming Soon
Berkeley County Recording Alert (follow instructions)
Charleston County Property Recording Alert System
Colleton County Property Fraud Alert
Dorchester County Recording Fraud Alert
Fairfield County Property Fraud Alerts
Georgetown County Property Fraud Alerts
Greenville County Property Alert
Greenwood County FraudSleuth
Horry County Recording Notification Service
Jasper County Fraud Detection Notification Service
Kershaw County Property Fraud Alert
Newberry County Fraud Alerts
Oconee County Property Check Fraud Service
Saluda County PropertyCheck
Spartanburg County Property Fraud Alert
York County Free Property Monitoring

Counties not listed here don’t have a similar system at the time of this writing, but that could change in the future. Check back with your county to see if the service is added later.

Legal Advice from Experienced Business and Real Estate Attorney Gem McDowell

For legal help and strategic advice in South Carolina, call Gem McDowell. Gem helps individuals and businesses create and review contracts, solve problems, and avoid mistakes. Contact Gem and his team at the Gem McDowell Law Group, with offices in Myrtle Beach and Mt. Pleasant, SC, to schedule your free consultation today by calling 843-284-1021.

What Are “Hot Powers”? Express Powers in a Power of Attorney

In a power of attorney (POA), “hot powers” are powers that must be explicitly granted by the principal to the agent. They differ from powers that are implied.

“Hot Powers” Under the UPOAA

Under § 201 of the Uniform Power of Attorney Act (UPOAA), a model law, the agent must be expressly granted the power to:

Create, amend, revoke, or terminate an inter vivos trust.
Make a gift.
Create or change rights of survivorship.
Create or change a beneficiary designation.
Delegate authority granted under the power of attorney.
Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan.
Exercise fiduciary powers that the principal has authority to delegate.
Disclaim property, including a power of appointment.
Exercise authority over the content of electronic communications, as defined in 18 U.S.C. Section 2510(12), sent or received by the principal.

As of 2026, the majority of states and Washington, D.C. have adopted a version of the UPOAA. Check what the hot powers are in your state, as they may differ somewhat from those in the UPOAA model law. Let’s look at the statute in South Carolina as an example.

“Hot Powers” Under South Carolina POA Laws

South Carolina adopted a modified version of the UPOAA in 2017. Under SC Code § 62-8-201, the first eight powers are the same as those above in the model law; the final four are:

Access a safe deposit box or vault leased by the principal;
Exercise a power of appointment in favor of someone other than the principal;
Reject, renounce, disclaim, release, or consent to a reduction in or modification o f a share in or payment from an estate, trust, or other beneficial interest; or
Deal with commodity futures contracts and call or put options on stocks or stock indexes.

You might have noticed that exercising authority over the content of electronic communications – the #9 hot power in the model UPOAA law – is missing from the South Carolina statute. While it’s not considered a hot power, that does not mean that the power is implied and automatic. If you, as a principal, want to grant this power to your agent, speak with your attorney about including the power explicitly in your POA.

Drafting, Revising, and Reviewing POAs and Other Estate Planning Documents

It doesn’t matter what kind of POA – general or limited/specific, and durable, non-durable, or springing – if you want an agent to have any of those powers listed above, you must list them in the POA expressly.

For help with drafting, revising, or reviewing powers of attorney and other estate planning documents like wills and trusts, call estate planning attorney Gem McDowell. Gem and his team at the Gem McDowell Law Group help individuals and families in South Carolina with customized wills and comprehensive estate plans. An estate plan tailored to you and your family’s unique situation can help protect your assets, give you peace of mind, and avoid family squabbles and other problems in the future.

The Gem McDowell Law Group has locations in Myrtle Beach and Mount Pleasant, SC. Schedule a free consultation with Gem by calling 843-284-1021.

The RAP Does Not Apply to Commercial Nondonative Transfers in SC: Impact of the Spring Valley Interests Decision

The Rule Against Perpetuities (RAP) is a legal doctrine that limits certain types of future property rights to prevent long-term “dead-hand control” and keep property freely transferable.

South Carolina’s RAP laws were humming along for nearly four decades without any significant changes until just this last year. Those changes:

South Carolina extended the “wait-and-see” vesting period for nonvested property interests and powers of appointment from 90 years to 360 years in May 2025. This change mainly affects high-net-worth families and individuals engaged in long-term estate planning. Read more about this here.
The Supreme Court of South Carolina ruled in January 2026 that future property interests arising from nondonative commercial transfers are not subject to any vesting timeframe under state law. This decision affects businesses and parties entering into commercial property agreements involving certain types of future property rights.

The supreme court’s ruling in the Spring Valley Interests, LLC v The Best for Last, LLC (2026) (read the decision here) is important because it affirms the way attorneys and business professionals have long interpreted the law – i.e., that the RAP does not apply to nondonative commercial transactions in South Carolina.

That’s the TL;DR summary of the situation, and it might be all you need to know. But if you are ever involved in complex commercial real estate transactions or leasing contracts, or any other agreements involving future property rights, it’s worth reading on for a deeper look at the history of the RAP in South Carolina and the court’s reasoning in the recent Spring Valley Interests decision, and what it means for you going forward.

Basics of RAP: Curbing “Dead-Hand Control”

The Rule Against Perpetuities came to the U.S. as part of the common law after originating in 17^th-Century England. The original intent was to help keep land freely marketable and transferable by preventing a property owner from directing what should happen to his property long after his death through a will or trust.

Without the RAP, a property owner could tie up the land for generations through so-called “dead-hand control,” strengthening the family dynasty, shielding it from creditors and certain taxes, and adversely affecting the local economy.

With the RAP, a nonvested future property interest or power of appointment must vest or terminate within a certain time. This prevents land (or other asset subject to the RAP) from being perpetually tied up and makes it easier to market and transfer.

The Changing Time Frame Under the RAP

This background is germane to the supreme court’s reasoning in Spring Valley.

“Life in Being” + 21 Years

The original common law RAP (CLRAP) limits the period of vesting to “a life in being plus 21 years.” Any nonvested interest must be vested by the time “a life in being” (measured by the life of an individual alive when the will or trust goes into effect) ends plus an extra 21 years. Here’s the twist: A future interest that could, theoretically not vest within that period of time is automatically void at the time of its creation under the common law RAP.

Over the years, many found that “a life in being plus 21 years” was too restrictive and created too much uncertainty, leading to arguments over what, hypothetically, could cause a property interest not to vest within that time. (See: “Fertile Octogenarian” and “Unborn Widow” legal fictions.)

The solution: New laws.

90-Year “Wait-and-See” Period, then 360

In 1986, a model law called the Uniform Statutory Rule Against Perpetuities (USRAP) was drafted which made two big changes. First, the timeline was changed from the much-debated “life in being plus 21 years” to a straightforward 90 years. Second, it made the 90 years a “wait-and-see” period, meaning that a future nonvested interest would only be void if still not vested after 90 years, rather than being void from the start.

South Carolina, like many other states, adopted a version of the USRAP. In 1987, SC enacted the SCUSRAP which supersedes the common law rule against perpetuities; see SC Code § 27-6-10 to § 27-6-80. From 1987 to May 2025, the “wait-and-see” period for vesting was 90 years, as it is in the model USRAP law. In May 2025, that period was extended to 360 years.

How does the RAP Apply to Commercial Property Interests?

So far, this discussion has only considered property rights in the context of individuals and families, not commercial property rights. Does the RAP apply to similar commercial property rights in South Carolina as well?

That’s what the Spring Valley Interests decision ultimately clarified.

The rule against perpetuities has always applied to donative transfers, like those made through wills and trusts, which are made voluntarily without expectation of payment or other consideration.

The RAP may or may not apply to nondonative transfers, as in commercial and business transactions, which are made with the expectation of payment or other consideration. It depends on state law.

In South Carolina, the SCUSRAP does not apply to nonvested property interests arising out of nondonative transfers, as that’s one of the exceptions explicitly listed in SC Code § 27-6-50. Accordingly, attorneys and business professionals have conducted business believing the RAP did not apply to nondonative transfers.

Then this case came before the courts to challenge this interpretation.

Spring Valley Interests, LLC v. The Best for Last, LLC Background

In 2017, White Interests Limited Partnership (White) entered into a loan agreement with The Best for Last, LLC (Best). White loaned Best $800,000 to purchase property (Property). In the loan agreement, Best granted White a freely assignable and “perpetual” option (Option) to purchase a 74.25% undivided co-tenancy interest in the Property for a fixed price of $800,000.

In 2019, White informed Best of its intention to exercise the purchase Option. White then assigned the Option to Spring Valley Interests, LLC (Spring Valley). Best and Spring Valley almost reached an agreement but ultimately couldn’t, as Best did not want to reimburse Spring Valley for legal fees.

Legal action followed. Spring Valley sued Best for specific performance of the Option. One of Best’s counterclaims sought a declaration that the Option was void because it violated the SCUSRAP and the CLRAP.

The circuit court found in favor of Best. It reasoned that since the nonvested property rights in question arose out of a nondonative transfer, the SCUSRAP did not apply – but the common law RAP did. Therefore, the “perpetual” Option was void because it violated the strict “life in being plus 21 years” vesting timeline test of the CLRAP. The South Carolina Court of Appeals affirmed the circuit court’s decision.

The decision was appealed.

The Supreme Court’s Reasoning in Spring Valley Interests

Did the appeals court err in determining the common law RAP applies to nondonative transfers in South Carolina?

Yes, says the SC Supreme Court. Its reasoning:

Plain reading of the statute

SC Code § 27-6-50(1) plainly states that the SCUSRAP does not apply to nonvested property interests arising out of nondonative transfers. Additionally, § 27-6-80 states “This chapter supersedes the common law rule against perpetuities.”

The circuit court and the appeals court “resurrected” the common law rule, “breathing life back into the CLRAP,” in the words of the supreme court. However, a plain reading of the statute does not support this interpretation; rather, the wording makes it clear that the common law RAP was no longer applicable in any scenario once replaced.

Intention of the SC General Assembly

Best argued that the South Carolina General Assembly did not intend for the SCUSRAP to abolish the common law RAP entirely but intended for it to apply to property interests excluded by the SCUSRAP. Here, the supreme court looks at the title of the 1987 act, which states the intention “to abolish the common law rule against perpetuities and replace it with a statutory rule…”

The argument that the General Assembly intended for the common law RAP to apply to any property rights is not supported.

Comments on the original USRAP

Additionally, the supreme court looked at comments made by the drafters of the USRAP (on which the SCUSRAP was based), the National Conference of Commissioners on Uniform State Laws (now called the Uniform Law Commission). The supreme court quotes the following excerpts: “A nonvested property interest, power of appointment, or other arrangement excluded from the Statutory Rule by this section is not subject to any rule against perpetuities, statutory or otherwise.” … “The rationale for this exclusion is that the Rule Against Perpetuities is a wholly inappropriate instrument of social policy to use as a control over such arrangements. The period of the rule—a life in being plus 21 years—is not suitable for nondonative transfers…” (Emphasis added by the court.)

Some states have “plugged in” this gap by creating statutes that address property rights related to nondonative transfers and other exceptions in the USRAP, but South Carolina is not one of them. In its opinion, the supreme court says, “These comments speak for themselves and support only the conclusion that the Option is not subject to any rule against perpetuities.”

The case was reversed and remanded.

The Takeaway: Think Carefully Before Signing Away Future Interests

The SC Supreme Court’s confirmation of how the statute should be interpreted and applied could be seen as extreme, and there is always the possibility that South Carolina legislators could amend the law to address it.

But it’s likely this will stick, as it is in line with the trend towards less restrictive RAP laws on both commercial and private property. Dozens of states already do not impose the RAP on commercial, nondonative transfers, and as of January 2026, South Carolina is officially on that list, too.

Either way, if you are a party to commercial agreements in South Carolina that involve future nonvested property interests, act as if the RAP does not and will not apply, and think carefully before signing anything. Such future interests can be an encumbrance on a property that cloud a title and severely diminish its marketability and transferability.

Call Gem McDowell for Help with Contracts and Commercial Real Estate Transactions in South Carolina

Know what you are agreeing to when you sign an agreement. There can be damaging real-world ramifications stemming from an innocuous provision in a contract, such as a perpetual option for a party to purchase property at a fixed price.

Speak with business attorney Gem McDowell for strategic legal advice on drafting and signing contracts, commercial real estate transactions, and more. Gem has years of experience helping business professionals protect their business interests and handling high-value commercial real estate transactions in South Carolina. Contact Gem and his team at the Gem McDowell Law Group, with offices in Myrtle Beach and Mt. Pleasant, SC today by calling 843-284-1021.

Planning 360 Years Ahead: Dynasty Estate Planning in South Carolina After RAP Change

Great news for high-net-worth individuals and families in South Carolina: You now have the ability to direct what happens to your property for much longer after your death. Previously, long-term estate planning had an effective limit of 90 years, or about three generations. Now, South Carolina residents can create trusts to protect and manage assets for up to 360 years – roughly a dozen generations.

This change went into effect in May 2025 when Gov. McMaster signed H.3432 into law. The bill extended the “wait-and-see” vesting period for future nonvested property interests and powers of appointment from 90 years to 360 years under the state’s Rule Against Perpetuities (RAP) laws. See South Carolina Code Sections 27-6-20 and 27-6-40.

This extension makes South Carolina competitive with other trust-friendly states like Tennessee, South Dakota, and Delaware, potentially attracting more high-net-worth families and trust businesses. (This is likely why H.3432 passed both the House and the Senate unanimously.)

For high-net-worth individuals and families, this change doesn’t affect the what, just the how long of family dynasty estate planning. But planning that far into the future comes with its own challenges. Below, we’ll look at the basics and benefits of dynasty estate planning, then at three things to watch out for.

The Basics and Benefits of (Very) Long-Term, Multi-Generation Estate Planning

The Basics of the RAP: Curbing “Dead-Hand Control”

The Rule Against Perpetuities originated in 17^th Century England as a way to prevent long-term “dead-hand control,” when a deceased person directs or controls what happens to his or her property from the grave through a will or trust. This helped keep land marketable and transferable while limiting the power of family dynasties.

The RAP came to the U.S. as part of the common law with the same intention. However, it’s evolved over the years, trending in favor of individual property owners. The majority of states have extended the length of time individuals can direct what happens to their property after death – South Carolina included. (You can read more about the history of the RAP in South Carolina here.)

The RAP in South Carolina

South Carolina’s Rule Against Perpetuities applies to any nonvested future interest or power of appointment, whether that’s created through a trust, will, or other legal instrument. In practice, though, the RAP primarily applies to trusts, which are the best instruments for multi-generational estate planning.

Assets in trusts may enjoy the following protections in South Carolina, depending on how the trust is drawn up:

Avoidance of estate tax
Avoidance of generation-skipping transfer tax (GST tax)
Protection from creditors
Protection from lawsuits
Protection from divorce
Protection from any individual owner’s bad decisions

An individual beneficiary may enjoy the advantages of the assets during the life of the trust according to its terms, such as the right to live in a property, to receive income generated by the trust’s investments, or have the trust pay for HEMS.

The 360-year clock starts ticking when a future interest or power of appointment is created, either when an irrevocable trust is funded or when a revocable trust becomes irrevocable upon the death of the grantor/settlor. By the end of the 360-year period, any nonvested property interests or powers of appointment must either vest or terminate. Any assets that then pass into the beneficiaries’ personal estates are once again subject to estate taxes, creditors, and more.

The Realities of (Very) Long-Term, Multi-Generation Estate Planning: What to Watch Out For

The benefit of the 360-year time frame is simply that the assets are protected for much longer than previously allowed under state law. But planning so far into the future presents its own potential pitfalls. Here are three considerations before drawing up a dynasty trust.

Watch Out 1: Inflexibility. Flexibility in Your Trust is a Must.

Imagine it’s the year 1666 and you’re creating a legal document to direct what will happen to your property for the next 360 years. Could you even imagine how much the world would change? Would the plans you developed in 1666 make sense in the year 2026?

That’s one of the big challenges of creating a trust that’s valid for 360 years into the future: It’s impossible to know what life will look like in 2386. For this reason, you must ensure that your trust is flexible enough to meet beneficiaries’ changing needs over the coming centuries.

This could mean provisions of the trust:

Give future beneficiaries special powers of appointment so they can (within limits) direct which assets should go to whom
Give the trustee(s) powers to invest, manage, or sell assets as needed to carry out the purpose of the trust
Allow decanting, restructuring, mergers, and divisions
Use percentages or shares to determine distributions rather than fixed currency amounts
Address family-specific circumstances (to discuss with your estate planning attorney)

Avoid overly restrictive objectives and terms in the trust such as:

“This trust is to preserve the family home”
“Never sell the land”
“Invest only in bonds rated AAA”

Restrictive terms like these seem to make sense now, or even over the next five years, but could be obsolete or counter to the purpose of the trust in 360 years.

Watch Out 2: Choice of Trustee. Trustee Succession Is Crucial.

Choice of trustee is crucial no matter the trust, as the trustee holds a great deal of power. But with a trust that could conceivably last for centuries into the future, it’s certain that the trust will someday be managed by individuals or entities that don’t yet exist. What can you do to ensure your trust stays in good hands?

This is where trustee succession comes in. Speak with an estate planning attorney with experience drafting long-term trusts on procedures, provisions, and restrictions to include in the trust that determine how and when a new trustee is appointed.

You may also want to add additional layers of protection such as a trust director or trust protector.

Watch Out 3: Vulnerabilities. Trusts Are Not Invincible.

No matter how well-written a trust is, the assets in it are still subject to some outside forces.

A trust can protect assets from private threats like creditors, divorces, lawsuits, and the bad decisions of individuals who might squander them. But a trust cannot offer protect from public-law powers. For example, a piece of real property in a trust would still be subject to:

Tax liens, tax deed sales, or foreclosure due to unpaid property taxes
Claims of eminent domain
Easements
Adverse possession
Zoning or use laws
Other government rights and interests

In short: A trust is not a magical shield, not even a well-written one designed to last 360 years.

Strategic Advice and Help with Long-Term Estate Planning from Gem McDowell

Trusts bring uncertainty, as you don’t know what the future will look like. But you can help avoid problems and keep your assets protected by talking through potential scenarios with an experienced estate planning attorney like Gem McDowell. Gem has over 30 years of experience helping South Carolina individuals and businesses protect their interests and plan for the future. He and his team can help you create a custom estate plan that’s robust enough to protect your assets yet flexible enough to adapt to life’s inevitable changes.

Call Gem and his team at the Gem McDowell Law Group, with offices in Myrtle Beach and Mt. Pleasant, SC, at 843-284-1021 today to schedule a free consultation.

What is the Legal Rate of Interest in South Carolina in 2026?

On January 7, 2026, the Supreme Court of South Carolina issued an order on the legal rate of interest on money decrees and judgements for the upcoming year. The legal rate of interest in South Carolina for the period of January 15, 2026, through January 14, 2027, is 10.75% compounded annually. See the court’s original order here (PDF).

The rate “is equal to the prime rate as listed in the first edition of the Wall Street Journal published for each calendar year for which the damages are awarded, plus four percentage points, compounded annually,” according to South Carolina Code § 34-31-20 (B) (2020).

Compare this to the previous legal rates of interest compounded annually in South Carolina (with links to the original orders):

2026: 10.75%

2025: 11.50%

2024: 12.50%

2023: 11.50%

2022: 7.25%

2021: 7.25%

2020: 8.75%

2019: 9.50%

2018: 8.50%

2017: 7.75%

Divorce and Elective Share: Is My Soon-To-Be Ex Entitled to My Estate If I Die?

The answer: Yes, maybe. Your soon-to-be ex could very well have the legal right to claim one-third of your probate estate in South Carolina if you die before the divorce is finalized and filed. But there is some nuance to this topic, so let’s get into it.

Elective share is the portion of a deceased spouse’s probate estate that the surviving spouse is entitled to regardless of the terms of the will, as we’ve covered before. It protects surviving spouses from being unknowingly disinherited.

In South Carolina, the only reasons a surviving spouse would lose that right are:

Missing the deadline to file a claim
Signing a valid waiver (read more on our blog here)
Divorce

Divorce is where it can get tricky. Intent to divorce does not extinguish an individual’s right to elective share, nor does filing for divorce. So, then, exactly how and when does divorce affect the right to spousal elective share under state law?

That’s what we’re looking at today, along with the reasoning of the Supreme Court of South Carolina in Deborah Weeks v David Weeks (2024) (here) which affirmed that intention doesn’t matter – only the letter of the law does.

Weeks v. Weeks (2024) Brief Background

Deborah and James had a “stormy” relationship after they married in 1998. Deborah initiated many actions in family court over the years, and several temporary orders were issued – no final orders – but all actions were dismissed in 2012.

James and Deborah were still married at the time of his death in 2017. His 2001 will left everything to his two children from a previous marriage. Deborah filed for elective share.

The probate court disallowed her claim, and upon appeal the circuit court affirmed the probate court. But the South Carolina Court of Appeals and later the Supreme Court reversed the lower courts and found in favor of Deborah, favoring a plain reading of the letter of the law.

How Divorce Affects the Right to Elective Share in South Carolina

South Carolina courts have routinely protected and upheld the right of a surviving spouse to claim elective share.

Still, there are some instances when an individual no longer has a right to claim spousal elective share: once a divorce is finalized, and in select situations as described in South Carolina Code Section 62-2-802, which directly covers how divorce and annulment affect marital rights, and Section 62-2-204, which covers voluntary waiver of rights.

The right to claim elective share is extinguished:

Once a Divorce is Finalized

Under South Carolina Code Section 62-2-802(a), if the individual has divorced the decedent, and the two did not remarry and stay married until the decedent’s death, he or she is no longer a “surviving spouse” and is therefore not entitled to elective share.

Importantly, Section 62-2-802(c) states that “A divorce or annulment is not final until signed by the court and filed in the office of the clerk of court.”

What happens if a divorce is granted, but one spouse dies before the order is signed and filed? This exact scenario happened, as we’ve covered in this blog before. In short, in Hatchell-Freeman v. Freeman (2000), the SC Court of Appeals found in favor of the party claiming elective share, because she was still technically a “surviving spouse” under the law when the decedent died.

Upon Obtaining a Divorce or Annulment Not Recognized by South Carolina

Section 62-2-802(b)(1) addresses situations where an individual “obtains or consents to” a final decree or judgement of divorce or annulment but that divorce or annulment is not recognized by South Carolina. While technically still married under SC law, if the couple does not “live together as husband and wife” at the time of the decedent’s death, the individual no longer has the right to claim elective share.

Upon Marrying a Third Person Subsequent to an Invalid Divorce or Annulment

Section 62-2-802(b)(2) addresses situations where an individual has obtained a divorce or annulment that is not recognized by South Carolina but has then gone on to marry a third party. In these situations, the individual no longer has the right to claim elective share from the estate of the first spouse.

Upon Obtaining an Order Terminating All Marital Property Rights or Confirming Equitable Distribution

Under Section 62-2-802(b)(3), an individual who “was a party to a valid proceeding concluded by an order purporting to terminate all marital property rights or confirming equitable distribution between spouses” no longer has the right to claim elective share, as long as the couple were no longer “living together as husband and wife” at the time of the decedent’s death.

Upon Obtaining a Complete Property Settlement or Property Rights Waiver in Anticipation of Divorce

Under Section 62-2-204(b), a waiver of all rights in the spouse’s property or estate or “a complete property settlement entered into after or in anticipation of separation or divorce is a waiver of all rights to elective share” unless it provides to the contrary.

(Additionally, Section 62-2-802(b)(4) addresses instances of common law marriage, where an individual is not considered a “surviving spouse” unless his or her status as a common law spouse has been established within the time frame defined by statute.)

The Supreme Court Again Follow the Letter of the Law, Not Intent

In the Weeks opinion, the court cites SC Code Section 62-2-802 and Section 62-2-204 explicitly and shows how the statute did not apply in this case.

Deborah did not sign a waiver of elective share before or during the marriage, not even in anticipation of divorce. The orders issued were not final and were, in the words of the court, “not only temporary but ephemeral.” When James died, the two were still married and there was no pending divorce suit, final property settlement, or final order “purporting to terminate all marital property rights or confirming equitable distribution.” Under the law, Deborah was a “surviving spouse” and therefore retained her right to claim spousal elective share, even if that went against the wishes of James in his will.

The court found in favor of Deborah and affirmed her right to claim elective share. The court states, “Why the parties decided to drop their family court battle and remain married may be a mystery to others, but § 62-2-204 is not about unraveling the baffles of human affairs. It is about setting the boundaries of a surviving spouse’s rights. These rights are substantial, and the elective share statute must be construed in strict faithfulness to its plain terms.”

This approach is consistent with other decisions that rely on strict interpretation of the law, including Geddings v. Geddings (1995), Terry v. Terry (2012), Simpson v. Sanders (1994), and Hatchell-Freeman v. Freeman (2000), mentioned above.

“Sometimes the law’s boundaries do not parallel what some view as fair. The probate court, believing the fair thing to do was grant Deborah nothing, set the law aside and imposed its own idea of fairness. This it cannot do,” concludes the court.

What You Can Do Now

If you are in the middle of a divorce, what can you do? Speak with your divorce attorney and estate planning attorney to go over your options. You and your soon-to-be ex don’t have to wait until the divorce is finalized; you may be able to mutually waive your rights to elective share, obtain a complete property settlement in anticipation of divorce, or obtain a court order terminating all marital property rights.

For Help with Prenuptial and Postnuptial Agreements, Probate, Elective Share and More

Call estate planning attorney Gem McDowell of the Gem McDowell Law Group with offices in Myrtle Beach and Mt. Pleasant, SC. Gem and his team help create personalized estate plans that reflect your family’s wishes and circumstances and give you peace of mind knowing that your loved ones will be taken care of when the time comes. Gem also helps families through the probate process, from submitting the will to closing the estate, and more.

Whether you simply want to review an existing will, trust, or agreement to ensure it’s still valid, or you want to create a comprehensive estate plan, or get help with probate, call Gem and his team today to schedule a free consultation at 843-284-1021.

How to Force an LLC Member Out – Judicial Dissociation

What happens when you’re in business with someone whose behavior harms the LLC but who refuses to leave voluntarily?

Ideally, you have a well-drafted buy-sell agreement or operating agreement that addresses this exact situation and clearly lays out next steps. If not, you may be able to go to court to pursue judicial dissociation, the court-ordered removal of a member from an LLC.

South Carolina courts are typically reluctant to take such a drastic step, but it can be done. This blog will cover what it takes for a court to grant judicial dissociation in SC according to state statute and look at a case where the appeals court did not grant judicial dissociation, reversing the circuit court’s earlier decision. Note: We previously covered this case, The Boathouse v. Richard Stoney (2024) (read it here), on the issue of whether a single member “class of one” can bring a derivative action in SC.

South Carolina Statute on Judicial Dissociation

South Carolina Code Section 33-44-601 lays out the many ways in which a member of an LLC may be dissociated from the LLC, with subsection (6) specifically listing the circumstances under which a member may be expelled by judicial determination:

If the member engaged in conduct that “adversely and materially” affected business;
If the member committed a “material” breach “wilfully or persistently” of the operating agreement or duty owed to the company and other members, as described in Section 33-44-409 (covering General standards of member’s and manager’s conduct); OR
If the member’s conduct relating to the business made it “not reasonably practicable” for the business to carry on with that member.

If a member’s conduct fits into one or more of the categories above, he or she may be removed from the LLC by the court.

Factors to Consider Whether Judicial Dissociation Is Warranted

That’s what the law says, but it’s up to the court to apply it on a case-by-case basis.

In the Boathouse opinion, the SC appeals court cited an “instructive” decision from the Supreme Court of New Jersey, IE Test, LLC v. Carroll (N.J. 2016), which laid out several factors to consider (while noting that it’s not binding on the South Carolina court):

The nature of the LLC member’s conduct relating to the LLC’s business;
Whether, with the LLC member remaining a member, the entity may be managed so as to promote the purposes for which it was formed;
Whether the dispute among the LLC members precludes them from working with one another to pursue the LLC’s goals;
Whether there is a deadlock among the members;
Whether, despite that deadlock, members can make decisions on the management of the company, pursuant to the operating agreement or in accordance with applicable statutory provisions;
Whether, due to the LLC’s financial position, there is still a business to operate; and
Whether continuing the LLC, with the LLC member remaining a member is financially feasible.

The New Jersey Supreme Court states that mere conflict isn’t enough to warrant dissociation. Members seeking to expel another member through forcible dissociation must “clear a high bar” and prove that it’s not reasonably practicable to carry on the business with the member.

The Boathouse case: Judicial Dissociation in Practice

All of that sounds well and good, but it’s very theoretical. What does it look like in real life?

In the Boathouse case, the circuit court granted a motion for judicial dissociation of a member, which the appeals court later reversed.

For a more thorough look into the interesting background of this case, read our previous blog. Briefly: Cousins Laurence Stoney and Richard Stoney are both members, along with other individuals, of an LLC that runs the popular Charleston-area restaurant The Boathouse on Breach Inlet. Over the course of many years, Laurence alleged, Richard misspent company funds, taking money earned by the Boathouse and spending it in his other businesses and on personal expenses such as vacations and polo ponies. Richard, through a different but related LLC, ended up owing the Boathouse LLC $4 million.

But the motion for dissociation was not against Richard, it was against Laurence. Laurence sought to bring a derivative action as a “class of one” against Richard for his conduct. In turn, Richard and a few other third-party Intervenors filed a motion to dissociate Laurence from the company. The circuit court granted the motion to dissociate Laurence, based on:

Laurence denigrating the company to vendors,
Laurence’s efforts to change ownership and management during Richard’s divorce, and
Laurence’s efforts to purchase land that Richard had an interest in without disclosing his efforts to Richard

The court of appeals looked at whether this behavior reached the high level required for forcible judicial dissociation.

Why the Appeals Court Reversed the Circuit Court

The South Carolina Court of Appeals found that “none of these incidents evidence conduct relating to the Company’s business that would warrant judicial dissociation.” In addition, the animosity between the members was not substantial enough to warrant judicial dissociation, as much of the animosity stemmed from disagreements over Richard’s use (or misuse) of company funds.

As to the other factors laid out by the New Jersey court, cited above, the South Carolina appeals court notes that Laurence was not in a position to create a deadlock or interfere with the running of the business, owning just a 5% stake; the Boathouse restaurant still brought in money and was projected to continue with strong sales; and the LLC would not be prevented from continuing to operate if Laurence remained a member.

The appeals court ultimately held that the circuit court erred when it found Laurence “engaged in conduct relating to the company’s business which makes it not reasonably practicable to carry on the business with the member” and reversed the grant of the motion for dissociation.

A Better Option: Solid Corporate Governance Documents

You don’t know what the future holds for your LLC, but you can be sure that it won’t always be smooth sailing. So figure out what to do in advance, instead of deciding how to handle the storm only after it strikes. When a situation does arise in the future, you can turn to your corporate governance documents instead of the courts.

At the least, when you are going into business with another person you should have:

An Operating Agreement. An operating agreement lays out the roles and responsibilities of each party so everyone is clear on what his or her job is and knows when a member is not living up to his or her duties. An operating agreement often includes provisions for removing or dissociating a member in certain situations such as misconduct or breach of duty.

A Buy-Sell Agreement. A buy-sell agreement sets the rules for how and when changes in ownership occur due to things like death, disability, divorce, or dispute. Members can agree in advance on what to do if one member does not live up to his or her duties as outlined in the operating agreement, which could include buying him or her out. Read more about buy-sell agreements here on our blog.

It’s best to have these drawn up when you start up your business, while all members are still on good terms. However, if you’ve been in business for a while and still don’t have anything in place, you can do it now – it’s never too late.

For Corporate Governance Documents and Strategic Legal Advice, Call Gem McDowell

To draw up or review operating agreements, buy-sell agreements, and other corporate governance documents, or for strategic business advice, call Gem at the Gem McDowell Law Group. Gem and his team help South Carolina businesses and business owners with starting, buying, selling, and more. With over thirty years in practice in the state, Gem has the experience to help you grow, avoid mistakes, and protect your interests.

The Gem McDowell Law Group has offices in Myrtle Beach and Mt. Pleasant, SC. Call 843-284-1021 today to schedule your free, no-obligation consultation.

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