Estate Planning Archives

Why a Springing Power of Attorney Is a Bad Idea – and What to Do Instead

The springing power of attorney (POA) looks like a great idea at first glance: The POA “springs” into effect if and when the principal becomes incapacitated. Only then does the agent have legal authority to act on behalf of the principal according to the terms of the POA.

A springing power of attorney (only used for financial POAs, not health care POAs) addresses a real concern many people have, which is abuse. What’s to stop an unscrupulous agent from abusing their powers under a regular durable POA while the principal is still mentally sound? A springing POA ensures this can’t happen. Read more about different kinds of POAs.

But we do not use springing POAs in our practice here at the Gem McDowell Law Group. Here are some of the problems we’ve seen with springing POAs, and what we use instead.

Problems with Springing POAs

The word “springing” makes people think the POA will come into effect quickly and easily after the principal becomes incapacitated. But medical incapacity and legal incapacity are not the same thing. In practice, the process often takes a couple weeks even in the best of circumstances; in challenging circumstances, it can take much longer. Here’s why.

It takes longer than people expect to have incapacity declared.

Springing POAs commonly require one or two physicians to declare the incapacity of the principal before it goes into effect. Just getting on the schedule of the physician(s) for an evaluation and completing required testing can take days or weeks, even in the best of circumstances. Until incapacity is declared, the POA is useless.

That’s for incapacity for cognitive causes like dementia or brain injury. South Carolina law also provides for incapacity due to physical absence, if someone is missing, detained, incarcerated, or out of the country and unable to return. Getting the right paperwork to have incapacity declared in these circumstances often takes even longer.

Identifying “incapacity” is challenging, and a physician may refuse to do so.

When does someone cross the line into “incapacity”? South Carolina Code § 62-8-109 defines it as the “inability of an individual to manage property or business affairs.” Incapacity due to cognitive decline from dementia or brain damage can be difficult to pin down; it’s common for people with cognitive decline to have good days and bad days, which makes the physician’s job challenging.

A physician may also refuse to declare a patient incapacitated over concerns of financial abuse or to limit his or her own liability. In this case, the agent must turn to the court to have the principal declared incapacitated. This adds even more time, and substantially more stress, to the process.

Third parties may refuse to honor the POA.

In the best of circumstances, it will take just a few days for a bank or other financial institution to complete its own internal compliance process to verify the legitimacy of the POA and the physician letter(s).

But they can and will refuse to honor a POA if its validity has not been proven to their satisfaction. Under SC Code § 62-8-120, a person may initially refuse to accept a POA and require a certification from counsel that the POA is valid, which can add a delay of two weeks or more.

It often costs money.

Paying for the medical evaluation(s) and testing often costs money out of pocket, and in some circumstances, additional attorney’s fees or court fees may be required, too. This factor is regularly overlooked by proponents of springing POAs.

Alternative to the Springing POA

Springing POAs have been falling out of favor as more people realize their challenges and limitations. As stated above, we do not draft springing POAs for our clients in our law firm.

Instead, we draft a durable POA – a power of attorney that’s in effect whether the principal is incapacitated or not – but hold it until needed. The document stays here in our office safe until the principal (or an authorized agent designated by the principal) tells us it’s needed. This may happen when the principal is sickly, elderly, or feeble, or it can occur earlier, if the principal feels more comfortable with that.

At that point, we file it with the county. Recording electronically typically takes just one business day. The POA immediately goes in effect once recorded; no doctor visits, no tests, no additional time required.

Do you need a new financial POA as part of your estate plan, or do you have a POA that needs reviewing to ensure it’s up to date? Give us a call here at the Gem McDowell Law Group. We serve individuals, families, and businesses here in South Carolina from our offices in Myrtle Beach and Mt, Pleasant. Call today to schedule your free, no-obligation consultation at 843-284-1021.

Probate vs. Non-Probate: A Practical, In-Depth Look at Assets After Death in South Carolina

When someone dies and the estate is settled, not all of the assets are treated the same way. Some assets go through probate, while others pass outside of probate.

Assets that pass through probate are called probate assets.

Assets that do not pass through or go through the probate process are called non-probate assets.

If you are helping settle the estate of a loved one who recently died or are engaging in estate planning for yourself and your family, understanding this distinction is important.

Below is a practical, comprehensive overview of the topic that goes beyond the surface.

Why Probate vs. Non-Probate Matters

First, why does it matter?

Probate vs. non-probate is not just a legal technicality or a matter of semantics. It has real-world implications for the heirs and beneficiaries.

Whether an asset like a house, vehicle, or bank account is subject to probate or not will determine:

How quickly the heir/beneficiary can take possession of certain assets
Whether court oversight is required
Whether the asset can be used/liquidated to satisfy creditors
Whether the asset goes into the probate estate or not

On this last point, only assets subject to probate make up the “probate estate.” It’s from this pool of assets that debts, taxes, and other expenses are paid, and what’s left over is then divided among heirs. If someone has purposely tried to avoid probate, the probate estate itself will be small or non-existent. Read more about what it means to avoid probate in South Carolina, and why it’s not always necessary.

We’ll look at the probate process more below. Next, what assets are subject to probate, and what aren’t?

Probate Assets vs. Non-Probate Assets (Which Assets Are Always, Never, Sometimes Subject to Probate)

Whether an asset is subject to probate or not does not depend on whether there’s a valid will. Instead, it’s the legal mechanism of transfer that determines whether the asset is subject to probate or will pass outside of it.

Probate: When the succession of ownership is determined either by the terms of the will or (if there is no will) by state intestacy law, the asset is subject to probate.
Non-probate: When the transfer of ownership is controlled by beneficiary designation, survivorship terms, or contract language, the asset is not subject to probate.

Assets subject to probate in South Carolina:

Real estate owned solely by the deceased
Deceased’s share in real estate owned as joint tenants in common (TIC)
Bank accounts solely in the name of the deceased with no valid POD (payable on death) designation
Bank accounts owned jointly without explicit survivorship language
Investment accounts with no valid beneficiary or TOD (transfer on death) designation
Vehicles, etc.*, owned solely by the deceased
Deceased’s share in a vehicle, etc.*, owned jointly with “AND” in the title
Deceased’s interest in a business without a valid written succession plan
Life insurance proceeds payable to the estate rather than an individual beneficiary
Life insurance proceeds from a policy with missing or invalid beneficiaries
Retirement accounts with missing or invalid beneficiaries
Unpaid wages, commissions, or refunds owed to the deceased at the time of death
Personal property (e.g., furniture, jewelry, clothing, physical cash)

Assets not subject to probate in South Carolina:

Real estate owned as joint tenants with rights of survivorship (JTWROS) or owned with explicit survivorship language in the deed
Vehicles, etc.*, with a TOD designation
Vehicles, etc.*, jointly owned with “OR” in the title
Deceased’s interest in a business with a valid written succession plan
Life insurance proceeds from a policy with a valid named beneficiary
Retirement accounts with a valid named beneficiary
Annuities with a valid named beneficiary
POD (payable-on-death) bank accounts
TOD (transfer-on-death) investment accounts
Assets correctly held in certain trusts

* “Vehicles, etc.” includes any property for which the SCDMV issues a title of ownership, including motor vehicles, mobile / manufactured homes, trailers / campers / RVs, etc.

Assets sometimes subject to probate depending on how they are owned/titled, include (but are not limited to):

Mineral rights
Digital assets
Timeshares
Intellectual property
Promissory notes
Structured settlements

A probate attorney can help unravel ownership and how these assets should be handled.

Cheat Sheet Chart by Asset and Ownership

Here’s a chart summarizing how different assets are categorized as probate or non-probate in South Carolina depending on how they are owned or titled:

Deceased’s interest in:	Subject to probate:	Not subject to probate:
Real estate / real property	Owned solely by the deceased Owned jointly as tenants in common (TIC)	Owned jointly as tenants with rights of survivorship (JTWROS) or otherwise owned jointly with explicit survivorship language
Vehicles, inc. motor homes, RVs, etc.	Owned solely by the deceased without valid TOD designation Owned jointly with “AND” in the title	Owned solely with valid TOD designation Owned jointly with “OR” in the title
Bank and investment accounts	Owned solely by the deceased without a POD or TOD designation Owned jointly but without explicit survivorship language	Owned solely by the deceased with a valid POD or TOD designation Owned jointly with explicit survivorship language
Retirement accounts, life insurance proceeds, and annuities	Proceeds from policies and accounts with missing or invalid beneficiaries Life insurance proceeds payable to the estate rather than an individual	Proceeds from policies and accounts with valid named beneficiaries
Business (LLC, partnership, etc.)	Interest in business without a valid written succession plan	Interest in business with a valid written succession plan
Other	Unpaid wages, commissions, refunds owed to deceased at time of death Personal property (e.g., furniture, jewelry, clothing, physical cash)	Assets correctly held in trust

Where Probate vs. Non-Probate Gets Complicated

The lists above are nice and neat, but they don’t fully reflect the sometimes-messy reality of probate. Here are some areas to watch out for that can cause confusion:

“Joint ownership” without survivorship language. In South Carolina, joint ownership doesn’t mean automatic ownership for the surviving co-owner. There must be explicit language regarding survivorship succession for the asset to pass outside probate. For real property, this means survivorship language in the deed itself. For bank accounts or investment accounts, this means survivorship language in the account agreement. If that language is missing, the deceased’s interest in that asset will be subject to probate.

Property located or titled in another state. Different states recognize different forms of ownership, which can affect whether an asset is subject to probate.

For example, South Carolina has not recognized a type of ownership of real property called “tenants by the entirety” (TBE) since 1953, but several other states still do. If a property owned as TBE is located in another state, a South Carolina court will follow the rules of that state. This usually means ownership of the deceased’s interest in the property will automatically pass to the surviving tenant outside probate. But if a property owned as TBE is located in SC (rare, but it can happen), and the deed does not contain explicit language on survivorship, it will be treated as if it were owned as joint tenants in common. Then the deceased’s interest in the property will be subject to probate.

Insolvent estates. Many assets passing outside of probate are shielded from creditors by law, but not all. In cases where the estate is insolvent – i.e., there’s not enough in the probate estate to cover debts, taxes, and other expenses – creditors may be able to recover from certain non-probate assets, even though they are not part of the probate estate.

Undetected errors, mistakes, and inconsistencies. Assets intended to pass outside of probate may end up in the probate estate for a variety of reasons, including named beneficiaries who are pre-deceased or missing, mistakes in language on a deed or title, unenforceable business operating agreements or buy-sell agreements, or improperly funded trusts. These kinds of errors only come to light in the course of settling the estate.

How Ownership of Probate Assets Passes, and How Long It Takes

Assets subject to probate must go through probate, the process of tying up legal and financial loose ends after a person dies, in order to be put in the heir’s possession.

The probate process is overseen by the county’s probate court. The personal representative, whose job it is to settle the estate of the deceased, often works with a probate attorney to get it done. Probate assets can only be transferred to heirs after approval from the probate court. Read more about the steps and costs of probate or read more about the role of the personal representative (aka executor) in South Carolina.

The personal representative and the probate attorney create an inventory of the deceased’s outstanding debts and assets. The assets subject to probate make up the “probate estate.” Debts, expenses, and final taxes are paid first out of the probate estate. Only then are the remaining assets distributed among heirs either according to the terms of the valid will or according to state intestacy laws. Read more about what happens to a person’s estate when they die “intestate” (without a will) and read more about the importance of probating the estate and taking the step-up in basis.

Timeline: How quickly heirs can take possession of their inheritance depends in part on state law, in part on the estate’s complexity and solvency. South Carolina law gives creditors eight months from the time notice is published to make a claim and expects most estates to be closed within three years after death.

Small estates: Small estates (estates with no real property that are valued under $45,000 as of May 2025) may qualify for a simplified, expedited process. Assets may pass to the heir(s) within just a few months after death.

Most estates: Disbursements typically occur within 9-12 months for most estates. If the estate is clearly solvent and straightforward, the personal representative may begin making partial disbursements even before the full eight months has passed.

Complicated and/or potentially insolvent estates: Disbursements typically occur once all outstanding issues (lawsuits, liens, debts, etc.) have been resolved, which may be many months or even years after death.

How Ownership of Non-Probate Assets Passes, and How Long It Takes

Ownership of assets not subject to probate passes according to the way the asset is owned or titled. Ownership is transferred:

Either automatically: For some assets, ownership passes automatically upon death without the heir/beneficiary having to do anything. E.g., interest in real estate owned as JTWROS or otherwise owned jointly with explicitly survivorship language in the deed; interest in a vehicle jointly owned with “OR” in the title; bank accounts owned jointly with survivorship language; and assets owned in certain kinds of trusts.

While it’s not absolutely necessary, the heir may have vehicles and real property retitled in his or her name only to keep the chain of title clean.

Or after claiming: For other assets, the heir/beneficiary must claim them to take legal possession. This usually requires submitting a claim form along with the death certificate and any other information required under the rules of the particular asset. E.g., life insurance proceeds, retirement account proceeds, POD or TOD accounts, and annuities.

Timeline: Heirs/beneficiaries may take or claim possession of non-probate assets right away without waiting for any set amount of time to pass. Approval from the probate court is not required. (Remember, however, that some non-probate assets may still be subject to creditors’ claims if the estate is insolvent.)

For Help with Estate Planning and Probate in SC, Call Gem McDowell

Are you the personal representative in charge of settling a loved one’s estate? Or are you looking for help with your own comprehensive estate plan? Gem and his team at the Gem McDowell Law Group can help. Gem has over thirty years of experience practicing in South Carolina, including helping families navigate the probate process and creating custom estate plans that avoid surprises and ensure peace of mind. Call today to schedule your free, no-obligation consultation. Offices in Myrtle Beach and Mt. Pleasant, SC. Call 843-284-1021 today.

Is the Trustee’s Duty to the Beneficiary or to the Trust Itself?

Does a trustee have a duty to the beneficiary or to the purpose of the trust?

These are often in alignment, and the trustee doesn’t have to choose one over the other. But sometimes they are in conflict, and that’s where issues arise.

This is not just an abstract legal concept; it has consequences in the real world. A trustee who does not live up to his or her duty under the law can get in legal trouble, as one trustee found out in last year’s South Carolina Court of Appeals case Baskin v. Walkup (2025) (find it here). The trustee was not only removed from his role but was found in contempt and ordered to pay over $100,000 in legal fees.

Before jumping into the details of the case, which should be illuminating to trustees in South Carolina, let’s see what state statute says.

Purpose or Beneficiaries: What South Carolina Law Says

Under South Carolina Code:

“Upon acceptance of a trusteeship, the trustee shall administer the trust in good faith, in accordance with its terms and purposes and in the interests of the beneficiaries, and in accordance with this article.” – Section 62-7-801

“A trustee shall administer the trust solely in the interest of the beneficiaries.” – Section 62-7-802(a)

“The duty of a trustee to act in good faith and in accordance with the purpose of the trust” cannot be overridden by any provision in the trust. – Section 62-7-105(b)(2)

The purpose of a trust may be to preserve family wealth and/or land; to provide for beneficiaries during their lifetimes; to fund charitable institutions; and so on. It’s advisable for the grantor/settlor of a trust to explicitly state the purpose of the trust so there’s no confusion as to its purpose. South Carolina Code Section 67-7-105(b)(3) requires that a trust “have a purpose that is lawful and possible to achieve.” It cannot be illegal or violate public policy.

A trustee must prioritize the goals of the trust and the wishes of the grantor/settlor rather than act in his or her own best interest. The trustee must also serve the beneficiaries while being careful not to go against the trust’s purpose by agreeing to a beneficiary’s requests for more funds – a common occurrence, in our experience.

But what if not making more disbursements to the beneficiary actually violates the trustee’s duty to the trust? That brings us to Baskin v. Walkup.

Baskin v. Walkup (2025) – The Background

Eldridge Baskin died in 1990, leaving a house on Summerlea Drive and its contents to his only child, then-43-year-old daughter Jane E. Baskin (Baskin) who had certain needs due to cerebral palsy.

The rest of his estate was put in a trust for Baskin’s benefit for the rest of her life. Under the terms of his will, the trust was “for the sole benefit of my daughter, Jane E. Baskin, the sole purpose of the trust created hereunder being to provide for the well[-]being of Jane E. Baskin so long as she shall live.”

Family friend William B. Walkup was named trustee, and under the terms of the trust he had broad powers to manage and invest the trust’s assets and “complete and absolute discretion” to make disbursements to Baskin.

The trust started with over $130,000 in liquid assets and a rental home worth over $40,000. Over the years, the trust’s value grew to over $500,000 under Walkup’s management, according to later testimony.

Over the years, too, the relationship between Baskin and Walkup deteriorated to the point where Baskin filed an action seeking removal of Walkup as trustee and an accounting in July 2020.

The Trial – Disagreements Over Trust Funds

The trial began in January 2021.

Baskin testified that in June 2015, against her will, Walkup moved her out of the family home she’d lived in since 1959 and into an apartment complex owned by Walkup. Walkup said that Baskin had begun falling at her home and that her being closer meant he and his daughter could (and did) provide additional support. Baskin said that the apartment was not accessible, as she was in a wheelchair at that time.

Baskin stated that she wanted to move back to the Summerlea Drive house, but Walkup wanted to move her to a nursing home. Baskin refused, and she began renovations on the house. Walkup said that expenses at the house were $14,400 per month, which would deplete the trust in three years. Expenses at the nursing home, by comparison, could be as low as $6,600 per month, depending on how much care Baskin needed.

In August 2017, Walkup sent Baskin a letter stating that the trust would stop paying insurance and electrical bills starting in October. The following May, through her attorney, Alex Weatherly, Baskin “demanded” $6,500 per month from the trust. Baskin also testified that the trust paid for just 40 hours of caregiving a week, but she needed ten hours per day. Baskin’s long-time friend Michele Moseley provided caregiving and was named/ Baskin’s POA in 2017.

The trial paused when a temporary settlement agreement was reached in which the parties agreed:

Walkup would remain the trustee responsible for investing and tax reporting
Baskin’s attorney Alex Weatherly would be appointed special trustee for Baskin’s care, and
Baskin would move to the Summerlea Drive house by February 1, 2021

(A handful of other legal actions followed, but they are not pertinent to this discussion; read the full opinion for details.)

The trial resumed over a year later, in August 2022. The court-appointed guardian ad litem (GAL), whose role it was to represent Baskin’s best interests, testified that Baskin needed more funds from the trust for professional care and to fix up the Summerlea Drive house. She also testified that Baskin did not seem to be under undue influence from Moseley.

A trust and estate attorney, on behalf of Walkup, said it was more important for a trustee to follow the testator’s instructions than to prioritize good relations with the beneficiary. He also stated that Walkup’s financial management of the trust, which had grown considerably under his care, was “remarkable.”

Walkup, for his part, had previously testified that he was 80 years old and had known Baskin since she was 11 months old, and he agreed to be trustee because he thought he could help. He stated that the relationship with Baskin deteriorated once Moseley became more involved, which Moseley denied.

The Court Removed Walkup as Trustee

The probate court found in favor of Baskin, ordering Walkup to be removed as trustee. This decision was based on (quoting the appeals court’s opinion):

“best serving Baskin;
a substantial change in circumstances in the relationship between Walkup and Baskin, which had “deteriorated to a toxic level of litigation”; and
requested by Baskin, best serving the trust, and not inconsistent with a material purpose of the trust.”

A suitable trustee was immediately available, noted the court, namely Weatherly, who had already been serving as special trustee.

Walkup was not only removed as trustee but was found in contempt and in breach of the temporary settlement agreement. He was ordered to pay Baskin’s attorney’s fees of $3,500 and $129,625.80.

This Appeal Followed

The appeals court affirmed. It found that the probate court made the correct decision based on Baskin’s best interests and the deterioration of the relationship between Walkup and Baskin.

South Carolina courts have authority under SC Code Section 62-7-706 to remove a trustee on certain grounds, a topic covered in a previous blog. Here, the appeals court cites subsections (b)(3) and (b)(4) specifically:

(3) because of the unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the interests of the beneficiaries; or

(4) there has been a substantial change of circumstances or removal is requested by all of the qualified beneficiaries, the court finds that removal of the trustee best serves the interests of all the beneficiaries and is not inconsistent with a material purpose of the trust, and a suitable cotrustee or successor trustee is available”

It also quotes the following comments on this section:

“A trustee may be removed for untoward action, such as for a serious breach of trust, but the section is not so limited. A trustee may also be removed under a variety of circumstances in which the court concludes that the trustee is not best serving the interests of the beneficiaries. The term ‘interests of the beneficiaries’ means the beneficial interests as provided in the terms of the trust, not as defined by the beneficiaries.”

And:

“Friction between the trustee and beneficiaries is ordinarily not a basis for removal. However, removal might be justified if communications breakdown is caused by the trustee or appears to be incurable.”

While Walkup’s financial expertise was “apparent,” the appeals court found that “the record was replete with evidence that long-term growth rather than Baskin’s well-being was Walkup’s primary concern.” Since that objective went against the stated purpose of the trust of caring for Baskin, and the trustee’s primary duty is to carry out that purpose, Walkup was removed as trustee.

Takeaway for Trustees – Beware

Whether or not Walkup genuinely believed he was prioritizing Baskin’s well-being or was more concerned with getting great returns on the trust’s investments, this is a bad outcome for him and could be bad for trustees in future cases. We’ve previously covered another case, IN RE: Deborah Dereede Living Trust v. Karp (2019), in which a trustee was found personally liable by the same court.

These decisions are a good reminder that individual trustees put themselves at risk for what is often a thankless and low-paying job. It’s imperative that trustees understand the purpose of the trust and serve the beneficiaries’ interests in alignment with that purpose.

Get Help with Trusts and Trustee Issues

If you need help drafting, revising, or revoking a trust, or have issues with a trustee and/or beneficiary, call estate planning attorney Gem McDowell at the Gem McDowell Law Group. Gem has over 30 years of experience practicing in South Carolina, and he and his team help individuals and families create personalized wills, trusts, and comprehensive estate plans tailored to their unique circumstances. Gem is a creative problem solver who can help you fix problems, protect your interests, and avoid mistakes in the first place.

Call Gem and his team, with offices in Myrtle Beach and Mt. Pleasant, SC, at (843) 284-1021 to schedule your free initial consultation today.

When and How Can a Trustee Be Removed?

In South Carolina, a trustee of a trust can be removed in one of two ways: either in accordance with the terms of the trust or by a court under state trust law.

Below, we’ll look at both in turn.

A Trustee Can Be Removed Under State Law

South Carolina Code Section 62-7-706 covers the grounds for removal of a trustee by the court and who may request the removal. (Note that Title 62, Article 7 of the SC Code is based on the Uniform Trust Code, a model law adopted in some form by the majority of the states.)

Who Can Request the Removal of a Trustee?

Under subsection 62-7-706(a), “the settlor, a cotrustee, or a beneficiary may request the court to remove a trustee, or a trustee may be removed by the court on its own initiative.”

On What Grounds Can a South Carolina Court Remove a Trustee?

Quoting subsection 62-7-706(b), a court can remove a trustee if:

“the trustee has committed a serious breach of trust;
lack of cooperation among cotrustees substantially impairs the administration of the trust;
because of unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the interests of the beneficiaries; or
there has been a substantial change of circumstances or removal is requested by all of the qualified beneficiaries, the court finds that removal of the trustee best serves the interests of all the beneficiaries and is not inconsistent with a material purpose of the trust, and a suitable cotrustee or successor trustee is available.”

Here, “interests of the beneficiaries” means “the beneficial interests provided in the terms of the trust,” as defined in Section 62-7-103.

These grounds give the courts discretion in determining whether a trustee should be removed based on the facts of an individual case. To see how the law was applied in a real case recently, check out our discussion of the South Carolina Court of Appeals Baskin v. Walkup (2025) decision here on the blog.

What is the Process for Having a Trustee Removed by the Court?

The party requesting the removal starts the process by filing a petition for removal in the court with jurisdiction over the trust, usually the probate court.

Before turning to the courts, however, the party seeking to remove the trustee should first look to the trust document.

A Trustee Can Be Removed Under the Trust’s Terms

Many trusts contain provisions regarding how and when a trustee may be removed, often with steps on how to appoint a successor trustee. Removing a trustee under the trust’s terms is typically faster and less costly than going through the courts.

Who Has the Power to Remove a Trustee?

A trust may grant the power to initiate the removal of a trustee to:

The settlor/grantor, if still alive
All of the named beneficiaries or a percentage of the beneficiaries (often a majority or supermajority)
A trust protector, if there is one
Co-trustees, if there are multiple trustees

This varies by trust, so look at the terms of the trust in question.

What Are Common Grounds for the Nonjudicial Removal of a Trustee?

Many trusts allow for the nonjudicial removal of a trustee on the same grounds listed above, namely breach of trust, lack of cooperation, unfitness, etc. This allows for the trustee’s removal through an administrative process rather than needing to go through the courts.

But a grantor has flexibility when creating his or her trust and may choose to allow for the trustee’s removal on broad or narrow grounds. At one extreme end, the grantor may include language that allows certain parties to initiate the removal of a trustee “for any reason” or “without cause.” At the other end, the grantor may only allow for the nonjudicial removal of a trustee for no reason but incapacity, for example.

There are advantages and disadvantages to both routes. If you are thinking about what kind of trustee removal provisions to include in your trust, talk through the alternatives with your attorney.

What is the Process for Removing a Trustee Under a Trust’s Terms?

The steps required to remove a trustee vary depending on the trust. Steps may include:

Informing the trustee and other parties in writing
Holding a vote (if agreement among a majority or supermajority of beneficiaries is required)
Selecting a successor trustee
Filing or recording the trustee’s resignation letter

The trustee may also need to provide an accounting and/or to turn over trust assets as needed.

Get Help with Trusts and Estate Planning from the Gem McDowell Law Group

For help drafting or revising a trust, removing a trustee, or developing a comprehensive estate plan that’s tailored to you, call estate planning attorney Gem McDowell. Gem and his team at the Gem McDowell Law Group, with offices in Myrtle Beach and Mt. Pleasant, SC, work with individuals and families in South Carolina to solve problems, protect their interests, and provide peace of mind. Call Gem’s office today at (843) 284-1021 to schedule your free initial 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.

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.

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.

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.

Pros and Cons of Family Friend vs. Corporate Trustee and Why Choice of Fiduciary Matters

A trustee of a trust is a fiduciary with a legal duty to act in the best interest of the trust beneficiary or beneficiaries in accordance with the terms and purpose of the trust.

The choice of trustee is an important one, which is why it should not be an afterthought when drawing up the trust instrument. The right trustee can ensure the grantor’s (aka settlor’s) wishes are carried out and help create a positive legacy for future generations. The wrong trustee can deviate from the grantor’s wishes and intent, stoke conflict among beneficiaries, and mismanage trust assets – sometimes to the point of criminal wrongdoing.

Here are some things to consider when choosing a fiduciary, plus some different options for your trust.

Family Friend or Corporate Trustee?

The choice of trustee often comes down to a choice between a family friend/relative or an unrelated corporate trustee. Both have their pros and cons.

The Family Friend/Relative as Trustee: Pros and Cons

Many grantors choose a trusted family member or friend for this role.

One main advantage is cost. The trustee is entitled to compensation as detailed in the trust instrument or, potentially, “reasonable compensation” under state law. This can be a set hourly rate or a small percentage of the trust assets (often below 1%) annually. Many trustees waive the fee altogether, especially if administering the trust is not too time consuming and challenging.

One disadvantage is that if the trust is time consuming and challenging, a family friend may not have the skills and experience. A trustee needs to know all relevant legal and tax matters to stay in compliance and may have a large job in terms of investing, managing, and distributing trust assets. Additionally, non-corporate trustees are not required to be bonded and insured like corporate trustees are, leaving assets more vulnerable to mismanagement and misconduct.

Succession planning can be a challenge, too. The trustee will eventually die or may step away from the role sooner due to illness, incapacity, or any number of other personal issues. The grantor must consider how a successor would be chosen in this circumstance.

Finally, consider the personalities, relationships, and interpersonal dynamics of the parties involved. Having someone who knows the grantor and beneficiaries personally can be a pro or a con depending on the particular situation. On the one hand, he or she may have valuable insights into the grantor’s values, wishes, and intent, and the individual needs and potential issues of the beneficiaries, because of those personal relationships. This can be a big benefit that corporate trustees simply can’t replicate.

On the other hand, this could work against the trustee. Beneficiaries may try to take advantage of their personal history with the trustee, the trustee could treat beneficiaries unfairly due to personal biases, or previously good relationships could be strained.

Whether the personal relationship is a pro or con is highly dependent on the individual personalities and relationship dynamics of the beneficiaries and trustee.

The Corporate Trustee: Pros and Cons

Another common option is the corporate trustee, where a financial institution is the trustee, and individual employees carry out the day-to-day duties of administering the trust.

One main advantage of choosing a corporate trustee is that you know the individuals involved have the skills and experience needed to manage and administer the trust. They are aware of all the legal and tax implications and obligations and can handle them, even if the trust is complex and time consuming.

Corporate trustees are also regulated by state and federal authorities, providing a level of protection you don’t have with non-professional family/friend trustees. Corporate trustees are bonded and insured against fraud, theft, misconduct, and errors and omissions.

Another benefit is the ease of succession planning; even if individual trust officers or advisors leave the role, another one takes over, providing continuity over time.

The biggest downside of choosing a corporate trustee is often the cost. A corporate trustee will not waive the fee, which is often a small percentage of the trust assets annually plus fees and expenses for any additional services. This can add up to a sizeable amount every year.

Finally, consider the lack of insider knowledge and personal relationships with the grantor and the beneficiaries. Again, whether this is a pro or con is a matter of individual personalities and relationships. An impartial corporate trustee could be ideal in certain situations, while in others, a trustee with personal knowledge could better carry out the spirit and intent of the trust.

Questions to Consider When Choosing a Trustee

If you’re considering creating a trust, here are some questions to consider when it comes to choosing a trustee.

Does the trustee understand my intent as the grantor, and can he or she help carry out that intent?
Is the trust so large and/or complex that it should be administered by a professional with experience? Or is it straightforward enough for anyone to manage?
Knowing the personalities and relationship dynamics of the beneficiaries, is it wiser to have a trustee who is impartial or one with a personal touch?
For family friend/relative trustees:
- Does he or she have a good relationship with the beneficiaries? Is he or she good at resolving conflict, dealing with different personalities, and saying “no” when necessary?
- Does he or she have the time necessary to administer the trust? Does he or she have the required knowledge about compliance, taxes, and investing to carry out the job effectively?
- Is he or she reliable? Trustworthy?
For corporate trustees:
- What experience does the individual/team administering the trust have with similar trusts?
- If the company is bought out or merges with another company, how does that affect continuity?
- What are the fees? Are additional services (such as litigation support, tax preparation, etc.) available, and how are they billed?

Speak with your estate planning attorney to come up with questions that are pertinent to your unique situation.

Additional Options for Your Trust

As the grantor, you are not stuck in an either-or position. You have options beyond having either a corporate trustee or a family friend serve as trustee, including:

Appoint a combination of both. With both types of trustees, you get the best of both worlds. The corporate trustee has the impartiality, experience, and time to properly administer the trust. The family friend/relative trustee has the personal connections and knowledge to ensure the trust is being administered according to the grantor’s wishes. The downsides: this is probably more costly (unless the family friend waives the fee) and could lead to clashes between the two trustees if the trust is not clear about the roles of each trustee.

Appoint a trust director*. A trust director is an individual with a specific role as described by the trust. For instance, a trust director may be solely in charge of managing the investment of assets but have nothing to do with making distributions or handling compliance. The trust director works alongside others to manage the trust. Read more about trust directors here on our blog.

Appoint a trust protector*. A trust protector is an individual whose role is to ensure that the trust is being administered according to the terms of the trust and the wishes of the grantor. He or she is not involved in asset management or day-to-day handling of the trust but has a more supervisory role. Read more about trust protectors and when it’s smart to have one here on our blog.

*These terms are sometimes used interchangeably.

Require Trustee to Be Bonded and Insured. A family friend or relative is not required by law to be bonded and insured, but the trust instrument can require it, providing an extra layer of protection.

Create a Private Family Trust Company (PFTC). Creating a PFTC is a viable option for ultra-high-net-worth families. PFTCs allow for more privacy, better continuity over time, and more input from family members (as members of the company) on how to administer the trust. The company itself is a fiduciary and acts as trustee. The downsides: PFTCs are expensive to maintain and are currently not recognized by all states.

Make the Trust Flexible Enough for the Future. Understand that things will change over time, and a trust should be flexible enough to adapt to uncertain future circumstances. Include provisions on replacing a trustee such as when replacement can or must happen and who has the authority to select the replacement.

Legal Help and Strategic Advice from Gem McDowell

Trusts may seem simple on the surface, but with many kinds of trusts, many potential pitfalls, and changing laws and tax regulations, they can quickly become complicated. Avoid mistakes and get strategic advice from estate planning attorney Gem McDowell of the Gem McDowell Law Firm with offices in Myrtle Beach and Mt. Pleasant, SC.

Gem and his team help individuals and families in South Carolina create estate plans that reflect their unique circumstances to protect what they love and bring peace of mind. Whether you need help creating or reviewing a trust, choosing a trustee, or developing a custom estate plan from scratch, Gem can help. Call 843-284-1021 today to schedule your free consultation.

The Family Investment Company: Benefits and Risks (Avoid These 3 Mistakes)

Family investment companies (FICs) are becoming increasingly common among high-net-worth families. An FIC is typically a family-held LLC or family limited partnership (FLP) in which a wealthy founder transfers assets into the company, and other family members become partners or members in the business.

Creating an FIC can be a good way to protect and manage assets, pass on wealth to future generations, and reduce tax liabilities. However, over the years the IRS has cottoned on to the fact that some FICs exist for the sole purpose of reducing or avoiding taxes. This has led to increased scrutiny.

If you have an FIC, or are thinking about creating one for your family, here’s what you should know.

You Need a Legitimate Non-Tax Reason to Operate a Family Investment Company

The purpose of the FIC cannot be to reduce or avoid taxes. There must be a legitimate non-tax reason for the family investment company to exist in the first place.

For many families, centralized asset management is reason enough. FICs allow for assets to be pooled, managed, and overseen by multiple family members, rather than keeping those assets in separate trusts or an individual’s account(s).

Other potential legitimate reasons for creating and maintaining an FIC include:

Asset protection (from creditors, family members, impending divorce, etc.)
Business succession planning
Preservation of larger assets by avoiding fractionalization

These are just some of the possible legitimate reasons to have an FIC; discuss your unique situation with your tax preparer, wealth advisor, business attorney, and/or estate planning attorney.

If the IRS determines that the FIC exists solely to evade paying taxes, it may be able to disregard the transfer of certain assets under Internal Revenue Code Section 2036 and count them in the estate of the donor/founder at death – a bigger topic we may cover in the future. For now, just remember that an FIC must have a non-tax purpose for existing.

You Must Respect the Business Entity and the Business

The IRS may look to see if the company is being run like a company or if it’s only “on paper.” A business that’s just on paper will have little to no activity and may serve solely as a place for assets to sit and generate income passively.

In contrast, a legitimate business in the eyes of the IRS is one that has a clear structure, maintains formalities such as holding meetings and keeping minutes, and engages in substantial economic activity such as managing and investing assets.

In addition, members/partners must respect the business entity itself and avoid piercing the corporate veil (read more about this on our blog).

Watch Out for Fractional Gifts

Why did the IRS start looking at family investment companies more closely over the past decade or so? Because some people got a little too greedy. Here’s what happened.

High-net-worth individuals discovered that the use of fractional gifts was a good way to handle the logistics of passing on assets to future generations, and it provided a tax benefit, too. A fractional gift in the context of an FIC typically involves a founder transferring a partial ownership interest in the FIC to a family member who is also a member/partner of the FIC.

This partial interest is eligible for discounts, often a discount for lack of control (when the stake in the business is under 50%) and a discount for marketability (because it’s harder to find buyers for a smaller, non-controlling share of a business). These discounts lower its value and, consequently, reduce the amount of gift taxes the donor is liable for. (Read more about discounts and on valuation of closely held companies here on our blog.)

But pigs get fat, hogs get slaughtered, as we often say. Not too long ago, some people tried to push the limit on these discounts, reducing the value beyond what the IRS found reasonable. This is what led to the IRS cracking down on families using FICs and fractional gifts, in particular, as tax evasion tools.

What’s a reasonable discount? There is no set number. This is something that needs to be determined on a case-by-case basis, ideally with the advice of an attorney, tax professional, and/or financial advisor.

Legal Advice on Business Matters and Estate Planning

For help with short-term and long-term estate planning and business planning, including succession planning, speak with Gem McDowell. Gem and his team help individuals and business professionals protect their interests and plan for the future with customized estate plans, corporate governance documents, and strategic advice. Gem also has many years of experience in tax law and holds a master’s degree in tax law from Emory University, and he is ready to help advise you on your tax issues.

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

Did You Know? SC Estates Over $600,000 Must Be Reported to the SCDOR

After someone dies in South Carolina, one of the duties of the personal representative (aka executor) is to create an inventory of the decedent’s probate assets and fair market value, as described in South Carolina Code Section 62-3-706. This inventory and appraisement must be filed with the court and mailed to any interested party within 90 days.

From there, the probate judge must send a copy of the inventory and appraisal to the South Carolina Department of Revenue (SCDOR) for every estate with probate assets of $600,000 or more, as detailed in SC Code Section 12-16-1220.

Here is the full text of that section:

“SECTION 12-16-1220. Information to be furnished by probate judge.

“The probate judge shall send to the department by mail a copy of the inventory and appraisal of the assets of every estate the gross assets of which for probated purposes are equal to or exceed the sum of six hundred thousand dollars within thirty days after it is filed, together with a copy of any will probated with respect to the estate. In the case of a nonresident decedent, the probate judge shall furnish the department with copies of all wills filed with his office and, in the case of an ancillary administration, the probate judge shall furnish the department with copies of inventories and appraisals in all cases regardless of the value of the tangible personal property and real property having a situs in this State.”

HISTORY: 1987 Act No. 70, Section 1.

What’s the purpose of this?

The purpose was to ensure that South Carolina received all the state-level estate taxes it was owed prior to 2005.

This law was created in 1987, when the unified credit amount was changed from $500,000 to $600,000, where it remained for a decade. All estates with probate assets of $600,000 or more were subject to federal estate taxes.

Also at that time, the federal government offered a federal credit against state estate taxes. This meant that a portion of an estate’s federal estate taxes would go to the state. South Carolina (and many other states) instituted a “pickup tax” equivalent to the amount of the federal credit. (See SC Code Section 12-16-510)

The federal credit was fully phased out in 2005, and South Carolina has no separate provision for collecting state-level estate taxes. So while the laws requiring reporting estates of $600,000 or more to the SCDOR and the “pickup tax” are no longer relevant, they remain on the books.

Get Help with Estate Planning

Gem and his team at the Gem McDowell Law Group help individuals and families across South Carolina create personalized estate plans to protect your interests and give you peace of mind. Schedule your free consultation today by calling us at (843) 284-1021 today.

Can I Disinherit My Child? Strategies for Disinheriting a Child from Your Will

The short answer is YES.

Yes, when writing your will, you have the power to disinherit your child and leave nothing to him or her. This is true in every state except for Louisiana, which does not allow a testator to disinherit a child under the age of 24 under the state’s “forced heirship” laws.

Leaving an inheritance to your child or children is not a legal requirement. But it is a cultural norm, and many children expect to inherit something upon the death of a parent. Some of those children then go on to contest the will or take other legal action to try to get what they believe is their fair share of the deceased’s estate.

For that reason, consider using some of the strategies below when intentionally disinheriting a child to reduce the likelihood of litigation after your death. The goal is not only to ensure your child doesn’t inherit a large amount from your estate, but also to help prevent legal action that could invalidate the will entirely.

Strategies for Disinheriting a Child in Your Will

Make your intentions clear

Name the child and be explicit about your intentions. Use language like: “I have intentionally chosen to make no provision for [Child’s Full Name] in my will.” (Consult an attorney in your state for the exact language to use in your will.)

Without this kind of language in the will, a child can make the case that the parent simply forgot to include them and make a claim for a share of the estate.

Consider a small inheritance instead of nothing

Rather than leave your child $0, you may want to leave a modest sum. It should be large enough to deter your child from taking legal action. This can soften the blow of being fully disinherited, too.

Include a “no-contest clause”

The tactic above is especially effective when used in conjunction with a “no-contest clause.” A no-contest clause states that if the child contests the will, he or she will not receive the inheritance.

Note that not all states recognize or enforce no-contest clauses. South Carolina does.

Disinheriting a Child FAQs

Should you include the reason for the disinheritance in the will?

In many cases, it’s best not to specify why you’re disinheriting the child. For one, wills become public during probate, so omitting details helps maintain privacy. Also, stating a reason could provide the disinherited child with grounds for contesting the will.

However, if you’re not leaving anything to your child in the will because you’ve made provisions for him or her outside the will, then it can be helpful to include this information.

To tell or not to tell?

A common question when disinheriting a child is, “Should I tell my child they are not in the will?”

At our firm, we advise our clients not to tell the child that he or she is being disinherited, for two main reasons.

You may change your mind. Relationships and circumstances change, and you may decide in the future to make a new will leaving an inheritance to your child.
Telling a child he or she is being disinherited can allow them to start building a case to eventually contest the will.

This does happen. We had someone call us who was upset his mother’s will left everything to his three siblings and nothing to him, as he had essentially already received his inheritance outside the will. He wanted to sue, which we told him was not possible as his mother was still alive. Instead, he started to monitor her movements, hoping to gather evidence of lack of testamentary capacity so he could contest the will after her passing.

Ultimately, it’s your decision whether to tell your child what’s in your will or not. In our experience, we recommend not doing so.

Call Estate Planning Attorney Gem McDowell

For help creating or updating a will, call Gem at the Gem McDowell Law Group. He and his team help individuals and families in South Carolina create personalized wills and estate plans that reflect their unique circumstances, family dynamics, and wishes. Call or contact us at our Myrtle Beach or Mount Pleasant, SC offices today to schedule a free consultation at 843-284-1021.

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