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.
Grounds for Contesting a Will in South Carolina
If you’ve been intentionally disinherited or unintentionally left out of the will, you might be wondering what legal options you have to challenge the will.
South Carolina Code Section 62-3-407 lists six grounds for contesting a will. These six grounds are found in many states as they come from common law, but exact laws regarding contesting a will vary by state.
In South Carolina (and many other states), grounds for contesting a will are:
- Lack of testamentary intent or capacity
- Revocation
- Mistake
- Fraud
- Duress
- Undue influence
It’s not enough to simply be unhappy with the terms of the will; the burden of proof is on you to show that the will is invalid based on one of the six grounds listed above.
Let’s look at each in turn.
Lack of testamentary intent or capacity
The testator must “be of sound mind” when executing the will for it to be valid.
The standard of “testamentary capacity” is not very high, however; it’s lower than the mental capacity required to sign a contract. All that’s required is that someone is aware that they are creating a will, what a will is, and what the will says.
Possible evidence for lack of capacity: You must show that the testator was not of sound mind and/or did not understand what they were signing at the time of executing the will. This could be video evidence, witness statements, healthcare records, or medical provider statements that demonstrate lack of capacity.
Revocation
A will that’s currently being probated by the court may be contested if there’s evidence that the testator planned to revoke or replace it.
Possible evidence for revocation: Evidence could include the existence of a newer, properly executed will, a valid codicil that revokes or changes terms of the will, or witness testimony.
Mistake
This broad category includes both mistakes in execution and mistakes in fact or intent.
Mistakes in execution includes things like not signing a formal will or a codicil in the presence of two witnesses, as required by law in South Carolina and many other states. (The exact requirements for validity depend on state law and on the type of will.)
Mistakes in fact or intent includes things like using the wrong name for an heir. In one example from our practice, a couple came in to create a will and named their two daughters as heirs to their estate. One child had been born a male, and the parents were insistent on using the child’s new chosen name rather than the legal name. This might seem like a small matter, but using a non-legal name could create grounds on which to contest the will in the future. In this situation, we advised the clients to use the child’s legal name and include “who goes by [New Name]” for clarity.
Possible evidence for mistake: Evidence for mistakes in fact or intent could include testimony or documentation that demonstrate the testator’s true intentions.
Fraud
A will may be contested on the grounds of fraud if one or more of the signatures was forged, if the testator was misled into signing a document believing it was something else other than a will, if a valid will was hidden or destroyed so a previous will would be probated in its place, and similar situations.
In our experience, the most common form of fraud occurs when the testator thinks they are signing Document A but are actually signing Document B. That’s why it’s important to take the time to read through what you are signing.
Possible evidence for fraud: It depends on the type of fraud suspected; evidence could include analyses from handwriting experts, witness testimony, or proof a more recent will was created and executed.
Duress
A valid will must be the product of the testator’s free will, and evidence of coercion can be grounds for contesting the will. If the testator created or changed the will under duress, such as blackmail, physical harm, or threat of harm, the will may be declared invalid.
Possible evidence for duress: Witness testimony, medical records indicating the testator’s vulnerability, and written communications between the testator and the individual coercing the testator are some types of evidence that can show duress. In cases of duress, the final will is often substantially different from the previous will, as well, which can serve to demonstrate the testator’s mindset.
Undue influence
Like a will created under duress, a will created under undue influence does not reflect the true intentions and wishes of the testator. But undue influence is more subtle than duress and often more difficult to prove.
Undue influence occurs when the testator is psychologically manipulated or pressured into redoing or making changes to the will, usually by someone close to the testator. This often (but not always) happens in conjunction with the trusted person isolating the testator or cutting him or her off from friends and family. It’s most common with older people who are more vulnerable physically and psychologically.
Possible evidence for undue influence: Proving a will is the result of undue influence is often challenging since undue influence happens “behind closed doors,” in the words of the South Carolina Court of Appeals. Evidence might include a final will which is substantially different from previous wills; proof that the testator’s behavior and habits have changed (e.g., the testator used to go out a lot but later stayed at home with a caregiver all day); records showing the testator used to communicate with friends and family regularly but then stopped and has lost contact with them; and witness testimony.
A successful case of contesting a will on the grounds of undue influence in South Carolina is Gunnells v Harkness, 2019, in which a daughter contested her mother’s will over undue influence from her brother. We examined this case in depth in a previous blog; read it here. It’s helpful to see exactly what kind of evidence – and how much – helps convince a court that undue influence has occurred.
Note: Don’t mistake unfair or unequal terms for undue influence. It’s not uncommon for parents to leave a larger inheritance to a child who has acted as caretaker in the final years, or for a testator to leave everything to the surviving spouse and nothing to the children. On their own, these terms do not indicate undue influence. Proving undue influence is challenging and requires a large amount of evidence that shows a clear pattern over time.
Other grounds
South Carolina Probate Code specifically lists six grounds for contesting the will. In addition, South Carolina courts may also invalidate specific provisions that violate public policy if, for example, a provision incites unlawful actions or is discriminatory.
Is Contesting the Will Worth It?
Contesting a will can be a lengthy, expensive, and contentious route, and sometimes it’s not worth it. (Read more about this in our blog on being disinherited, which you can read here.)
However, sometimes contesting the will is the right thing to do, especially if you believe the will does not accurately reflect the wishes of the deceased.
Get Help Creating or Contesting a Will in South Carolina
Gem McDowell has helped individuals and families in South Carolina for over 20 years with estate planning. Whether you need help creating, updating, or reviewing a will or estate plan, or need advice or assistance probating or contesting a will, he can help. Call Gem and his team at the Gem McDowell Law Group with offices in Myrtle Beach and Mount Pleasant, SC to schedule a free, initial consultation by calling 843-284-1021 today.
I’ve Been Disinherited – Now What? (And Is Contesting the Will Worth It?)
You were expecting an inheritance, but you were left out of the will. Now what? Is there anything you can do if you’ve been disinherited?
Maybe. State law protects spouses from being intentionally and unknowingly disinherited and gives other would-be heirs grounds on which to contest the will.
In this blog we’ll look at what you can do if you’ve been disinherited – that is, intentionally left out of the will. (If you were unintentionally left out, you were not “disinherited” but “omitted” or “pretermitted.” Read our blog on omitted spouse / pretermitted child for what to do next.) We’ll also consider the question of whether contesting the will is worth it.
Note that laws governing wills and probate vary by state, so while many of the concepts below apply to other states in addition to South Carolina, be sure to speak with an estate planning attorney in your state.
First things first:
Are You Entitled to an Inheritance?
Only a surviving spouse is protected from being unknowingly disinherited; more about this below.
No one else – not even a child of the deceased – is entitled to an inheritance in South Carolina. While there is a cultural custom and even expectation that parents will leave something to their children after death, it is not a requirement.
What To Do When You’ve Been Disinherited
Speak with an attorney in your state with experience handling will contests about your situation. Many law firms (including ours) offer a short, free consultation, which can help you understand what your options are.
The next steps depend on your unique circumstances. You may decide to do one of the following:
– Claim Spousal Elective Share
A disinherited spouse may claim “elective share,” a portion of the decedent’s estate guaranteed under the law to a surviving spouse in separate property states like South Carolina. The surviving spouse is entitled to this share regardless of the terms of the will, unless the couple has previously signed a waiver of elective share or similar document.
Read more about Elective Share in South Carolina and how to claim it here.
– Contest the Will
In general, a testator (the person writing the will) has broad authority to decide how to dispose of his or her assets, and the probate court will follow the testator’s wishes as recorded in the will. If he or she did not leave anything to you in the will, that’s usually the end of the matter.
However, there are situations in which a will, or portions of it, can be declared invalid if challenged. South Carolina Probate Code Section 62-3-407 provides the following six grounds on which to contest a will:
- Lack of testamentary intent or capacity
- Revocation
- Mistake
- Fraud
- Duress
- Undue influence
Read more about grounds for contesting a will in our blog here where we go into depth. In addition to the six statutory grounds, South Carolina courts may also invalidate provisions of a will that violate public policy, such as those that promote unlawful behavior or are discriminatory.
To contest a will, you must be an interested party, i.e., you would stand to inherit if successful in your claim. Further, the burden of proof is on you to prove the will is not valid, under the same section cited above. The presumption of the court is that the will is valid, so it’s your responsibility to provide enough evidence to overcome that presumption.
– Sue an Individual for Interference with Inheritance
Some states recognize an “intentional interference with inheritance” (IIWI) claim. This allows a would-be heir to sue someone whom they believe intentionally prevented them from receiving an inheritance through fraud, undue influence, defamation, or similar misconduct.
South Carolina does not recognize this cause of action as of August 2025, but that could change in the future.
– Accept the Terms of the Will and Not Pursue the Matter
It can be hard to accept that you were disinherited, especially if you had a good relationship with the deceased and were expecting an inheritance. You might think it’s unfair that your parent left everything to his or her spouse instead of the kids, or that siblings received unequal amounts, or that your partner left everything to the children from a previous marriage.
But wills don’t have to be fair; they often aren’t. Unfair and legally invalid are not the same thing, however. Many times, the prudent course of action is to accept the will as is and move on.
Contesting the Will: Is It Worth It?
We get calls from people who are blindsided, and often very upset, after discovering they’ve been cut out of a relative’s will. They are prepared to jump into litigation to get what they believe is rightfully theirs.
Here’s the truth: The process of contesting a will is expensive, challenging, and time-consuming – and that’s true even in the best-case scenario, when things go your way. If they don’t, you will be out a lot of money and may have irreparably damaged relationships with relatives and friends.
Before contesting a will, you need to know if it’s worth it. Ask yourself:
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What would you stand to gain in the best-case scenario?
Hint: It could be less than you think.
In many cases, people discover that the actual inheritance would be much less than what they had expected. This is especially true for estates of modest and average size. The Federal Reserve has an interesting article with data on expected vs. actual inheritance; see Panel B, which shows those in the bottom 50% by wealth, expected, on average, an inheritance of $29,400 but received just $9,700 – a substantial difference.
Why the discrepancy?
For one, inheritance comes from the decedent’s probate estate, after expenses are paid. A will only directs where assets subject to probate should go. (Read more about probate and which assets are subject to probate here on our blog.) From that, heirs inherit their portion after taxes, debts, probate fees, administrative costs, attorney fees, and funeral expenses have been paid out of the value of the estate. These expenses can eat up a large portion, leaving behind a much smaller estate to divvy up between heirs.
Also, just because a person is wealthy, it does not mean his or her probate estate will be large. Many people use trusts and other estate planning instruments to keep assets out of their probate estate. You may discover that the value of the probate estate is actually very small, even if the deceased was very wealthy.
You also have to consider how many people would share the inheritance. The number of other heirs you would split an inheritance with depends on how the probate court determines the assets should be distributed. It could be under the terms of the current will after certain provisions have been struck; under the terms of a previous will; or under state intestacy laws, which apply when someone dies without a will.
In one case we worked on, a man was upset that his mother’s will left everything to her husband (his stepfather) and nothing to him and his brothers. If he successfully contested the will, South Carolina’s intestacy laws would apply because there was no previous will. That means half would go to his stepfather and the other half would be divided between the four siblings. He’d stand to get just ¼ of ½ of the estate, or 12.5%.
Now, that figure doesn’t mean anything in and of itself; 12.5% of $10,000 isn’t a life-changing amount of money, but 12.5% of $10,000,000 is. It depends on the particular circumstances. But that brings us to the second question you should ask yourself.
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Risk Vs. Reward: What’s Your Tolerance?
Let’s say you stand to inherit 12.5% of an estate worth $10 million after all taxes, debts, and fees have been paid, which comes out to $1,250,000. It will take about $50,000 in legal fees to successfully contest the will. In this case, yes; if you have a strong case, risking $50,000 for the potential to gain $1,250,000 is worth it.
What about spending $10,000 for the potential to gain $17,000? A woman called our office upset that her mother had cut her out of the will and left everything to just one of the three sisters. If she prevailed in contesting the will, she’d split her mother’s roughly $50,000 estate with her two sisters (because there was no surviving spouse), which comes out to around $17,000. Is risking $10,000+ in fees for a shot at <$17,000 worth it?
In addition to risking her money, this woman would risk fracturing her relationships with her sisters, which brings us to the third question to ask yourself.
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Can You Accept the Non-Monetary Fallout?
Be prepared for the possible ramifications that have nothing to do with money. Contesting a will and battling over a deceased relative’s estate often leads to the destruction of previously solid relationships and family bonds. We see it every day, unfortunately.
Think about how much those relationships are worth to you before moving ahead with contesting the will.
Have You Been Disinherited? Do You Need Help with Estate Planning? Call Gem
The above is not intended to dissuade you from taking legal action, but to help you see the situation from a legal point of view. Maybe you believe the potential financial reward is worth the risk. Or maybe you’re not motivated by money but by the desire to right a wrong and ensure your loved one’s true wishes are carried out, especially if you believe there’s been fraud, duress, or undue influence. Whatever your situation is, we urge you to consider the questions above if you’re considering contesting the will.
Speaking with an estate planning / probate attorney in your state is a good first step. An attorney can help you claim elective share (if you’re a disinherited spouse) or help you determine whether taking legal action like formally contesting a will is likely to succeed.
Call estate planning attorney Gem McDowell for help probate, creating a will, contesting a will, or other estate planning matter in South Carolina. Gem and his team at the Gem McDowell Law Group help individuals and families across South Carolina create personalized wills and comprehensive estate plans for peace of mind, as well as handle issues of probate and inheritance. Call Gem and his team at their Myrtle Beach or Mt. Pleasant, SC offices today at 843-284-1021 to schedule a free consultation.
A “Class of One” May Bring a Derivative Action in S.C. – The Boathouse Case
What can a member of an LLC do when another member is mismanaging company money, using it to support his other failing business ventures, and (allegedly) spending it on personal expenses like exotic travel and polo ponies?
This is not theoretical; these are some of the facts in the 2024 South Carolina Court of Appeals case The Boathouse at Breach Inlet, LLC v. Richard W. Stoney (find it here). In it, one LLC member brought a derivative action, a lawsuit brought on behalf of a company/LLC by one or more of its shareholders/members, against another member.
A derivative action is often the only remedy shareholders/members have when management has failed to take action to protect the company. That’s why the Boathouse decision is important: It now gives standing to bring a derivative action to a “class of one” even if he or she is not “similarly situated” to other shareholders/members. It also looks at factors for determining whether the individual can maintain the claim.
We’ll look at what this all means and how the court came to its decision below.
(Note that a petition to rehear the case is currently pending before the Supreme Court of South Carolina. We will update this article with any new information.)
Very Brief Background of Boathouse
The background to this case is extremely detailed so this summary gives the broad strokes only. In short:
Richard Stoney (Richard) founded a number of interrelated LLCs starting in the 1990s. One was an LLC for the Boathouse on Breach Inlet (the Boathouse), a popular restaurant in the Charleston area, which he co-owned with other family members and business partners. Another was Crew Carolina, LLC (Crew Carolina), solely owned by Richard, which managed his other LLCs and restaurants. Using a sweep account for banking, revenue from the Boathouse and other restaurants went into the Crew Carolina bank account each night.
The Boathouse did well, but Richard’s other ventures did not. He began taking money from the Boathouse via Crew Carolina and using it to keep other enterprises afloat, as he later admitted to in divorce proceedings (Stoney v Stoney, 2018). Others testified that his misuse of company funds, including use for personal expenses, led to instances of not being able to make payroll, owing the IRS money, and incurring late fees. Richard was advised to stop these practices, yet they continued until at least May 2019.
Eventually, Crew Carolina owed the Boathouse LLC over $4 million.
No Support for Laurance’s Derivative Action
In October 2015, Laurance Stoney brought a derivative action on behalf of the Boathouse against Richard and Crew Carolina (collectively, Defendants). Laurance is Richard’s first cousin and one of the original co-owners of the Boathouse at Breach Inlet, LLC, owning 5%.
The derivative action asserted:
- Breach of fiduciary duty
- Conversion
- Unlawful distributions
- An accounting
- Unjust enrichment
Understandably, the Defendants asserted various claims against the action. In addition, two other members opposed the derivative action and moved to intervene.
In a non-jury trial, the circuit court issued an order holding that Laurence was not a “fair and adequate” representative to bring the action, saying that his motivations for doing so were vindictive and personal, rather than seeking to correct a corporate wrong. Further, it said the equitable remedy he sought was tainted by his own inappropriate conduct, especially since 90% of the Boathouse LLC’s membership opposed the action.
This appeal followed.
The Court Finds a “Class of One” Who Is Not “Similarly Situated” Has Standing To Bring a Derivative Action
The plain language of both South Carolina Code Section 33-44-1101 and rule 23(b)(1) of the South Carolina Rules of Civil Procedure allow for an individual to bring a derivative action.
However, the latter also specifies “The derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of the shareholders or members similarly situated in enforcing the right of the corporation or association.” (Emphasis added.)
And here’s where the court’s decision becomes interesting. The court notes that “The parties stipulated Laurence was not similarly situated to the other members, and Laurence admitted that no other members officially supported his action.” Yet it looks to other jurisdictions for guidance on interpreting “similarly situated” and how to determine what makes a valid “class of one” plaintiff. Among others, the court cites:
*A Utah Supreme Court case (Angel Invs. LLC v. Garrity, Utah 2009) holding that a single shareholder could maintain a derivative action as a “class of one” when the shareholder:
- Seeks by its pleading[s] to enforce a right of the corporation and
- Does not appear to be similarly situated to any other shareholder
(Emphasis added.)
And
*A Texas Supreme Court case (Eye Site, Inc. v. Blackburn, Texas 1990), which found that the rule guiding who may bring a derivative action “does not place any minimum numerical limits on the number of shareholders who must be ‘similarly situated.’ It follows that if the plaintiff is the only shareholder ‘similarly situated,’ he is in compliance with both the letter and the purpose of the rule.”
The South Carolina Court of Appeals found that even though, by the admission of multiple parties, Laurence was not “similarly situated” to other LLC members, he did have standing to bring a derivative action. “We agree with the above cases and hold that under the appropriate circumstances, a single member of a limited liability company may ‘fairly and adequately represent the interests of’ a class of one and have standing to maintain a derivative action. To hold otherwise would be to deprive a sole dissenting shareholder from seeking relief from another shareholder’s wrongdoing.”
Davis Factors and Requirements for Representation
Standing to bring a claim is one thing. Being able to maintain the claim is another.
The court looks to the Sixth Circuit Court of Appeals case Davis v. Comed, Inc. (1990), which set forth the following factors for evaluating whether a plaintiff meets the requirements for representation:
- Economic antagonisms between representative and class
- The remedy sought by plaintiff in the derivative action
- Indications that the named plaintiff was not the driving force behind the litigation
- Plaintiff’s unfamiliarity with the litigation
- Other litigation pending between plaintiff and defendants
- The relative magnitude of plaintiff’s personal interests as compared to his interest in the derivative action itself
- Plaintiff’s vindictiveness toward the defendants
- The degree of support plaintiff was receiving from the shareholder he purported to represent
These factors are not exclusive, and the court must consider the totality of the circumstances.
To determine whether Laurance is a good representative of the company who can maintain the action, the Appeals Court of South Carolina addresses these factors, with particular emphasis on the two cited in the circuit court’s decision:
Lack of support: The court said it must consider the motives of the other LLC members for opposing the action. Based on the evidence, the court determined it was “evident” that Richard and the other co-owners opposing the action were “motivated by their individual interests.”
Vindictiveness: The circuit court found that Laurance was motivated by vindictiveness. But the appeals court notes that high emotions are common in such disputes in closely held corporations, and that the hostility between the parties in this case is “not fatal” to Laurance maintaining the derivative action.
“We further hold the remaining Davis factors support Laurence’s standing to bring this action,” the court says.
(Read the opinion for the specifics on why the court came to these conclusions.)
Get Strategic Legal Advice from Business Attorney Gem McDowell
Gem McDowell and his team at the Gem McDowell Law Group help businesses in South Carolina grow and succeed while protecting the interests of the individuals involved and the business itself. If you need advice or help starting, growing, buying, or selling a business, or you want strategic advice from a problem solver with over 30 years of experience, call Gem. We have offices in Myrtle Beach and Mt. Pleasant, SC, and offer a free initial consultation. Schedule yours by calling (843) 284-1021 today.
Can You Prevent Future Spouses from Inheriting? Irrevocable Wills vs. Public Policy and the Ward Case
Imagine your spouse dies and you discover that not only were not provided for in the will, but that their previous will specifically barred you from inheriting anything at all. What would you do?
This is what happened to Mary K. Ward. Mary was the fourth wife of Stephen Day Ward, Jr., who had an irrevocable will from an estate plan created with his third wife, Nancy. While Stephen’s will explicitly barred future spouses from inheriting anything, South Carolina statute provides for spouses left out of the will. This led to an interesting conflict: which should prevail, public policy or a valid contract?
The matter, In RE: Estate of Stephen Day Ward, Jr., went before the South Carolina Court of Appeals in 2024 (read it here), and we go into it below.
It’s a good look at how South Carolina courts view public policy and at the powers and limitations of irrevocable wills. It’s especially important if you have or have considered getting an irrevocable will.
Should You Get an Irrevocable Will? Pros and Cons
Irrevocable wills are wills that cannot be changed or amended once signed. The only exception is divorce, which typically only blocks the ex-spouse from acting as executor and inheriting anything; the rest of the will stands. (The laws regarding this vary by state; check in your state.)
Some people, often married couples, choose irrevocable wills because they cannot be changed. They want their estate plan to be carried out as originally agreed, even if one spouse predeceases the other by many years. The surviving spouse is bound by the terms of the will(s) they created together and cannot change the terms for any reason.
Advantages of an irrevocable will over a traditional revocable will:
- Guarantee the estate plan will be carried out, even after death
- Protect assets from being passed down to the surviving spouse’s new partners, spouses, or stepchildren, or other potential heirs
- Prevent the surviving spouse from being pressured into changing terms of will
We do not draft irrevocable wills here at our law firm – neither irrevocable joint wills (one document for two or more people) nor mutual wills (separate documents for each individual).
Why not? Because things change. Life circumstances, family dynamics, personal finances, and state and federal law affecting estate planning can change drastically, but an irrevocable will can lock you into decisions you made long ago when life was very different. Further, other tools can be used to accomplish many of the same goals. We’ll go into some of those options down below.
Finally, there are no guarantees, even with an irrevocable will. Which leads us to the Ward case.
The Irrevocable Wills and Estate Plan of Stephen and Nancy
In 2013, Stephen Ward married for the fourth time, to a woman named Mary. They did not create an estate plan together during their marriage, and Stephen did not take any action with regards to the will he executed during his third marriage to wife Nancy.
Stephen died in 2016. Under the terms of his will, Mary was barred from inheriting anything.
Mary then sought, through her daughter, to be declared an omitted spouse. As an omitted spouse, she would be entitled to the share of Stephen’s probate estate that she would have received had there been no will at all, which is 50% under South Carolina’s intestacy laws.
Stephen’s children (the Appellants), acting as his co-personal representatives, disagreed that Mary should receive an inheritance. That’s because Stephen and Nancy had executed an estate plan together in 2005 which barred any future spouse from inheriting anything.
The Terms of the Estate Plan with Third Wife Nancy
The estate plan, which included Stephen’s irrevocable last will and testament (the Will) and an agreement for mutual wills and trusts (the Agreement), worked with interlocking provisions to ensure their wishes were carried out in this manner:
- After one spouse died, his or her assets would “pour over” into a trust controlled by the other
- After the death of the other spouse, the remaining assets would be dispersed among Stephen’s and Nancy’s children
These terms are quite common among couples. The Agreement contained the following terms regarding re-marriage, too:
4.2 If he or she remarries after the death of the
Predecessor, he or she will:
4.2.1 Thereafter ratify his or her Will and
Trust in the form and with the provisions
contained in his or her Will and Trust
annexed hereto; and
4.2.2 As a condition of such re-marriage,
require any person he or she re-marries to
legally and unconditionally waive his or her
right to an Elective Share in the Property
provided to them under S.C. Code Ann.
Section 62-2-201
Stephen did not carry out the terms of the Agreement after his marriage to Mary to ratify the will or to have Mary waive her right to elective share.
The matter was heard in probate court and circuit court before eventually going before the Court of Appeals of South Carolina.
The Four-Part Test for Omitted Spouses
Did Mary qualify as an “omitted spouse”? To settle the matter, the court looked to a four-part test it previously established in Green v. Cottrell (2001), which essentially turns the relevant statute (SC Code Section 62-2-301) into a checklist:
“A surviving spouse who wishes to qualify as an ‘omitted spouse’ must demonstrate:
- The decedent spouse executed the will in question prior to the marriage;
- The will does not provide for her as the surviving spouse;
- The omission was unintentional; and [sic]
- The decedent did not provide for the spouse with transfers outside the will.”
The first two points: undisputedly true.
Point #3: “Hotly disputed.” The court states that had Stephen executed the documents required by section 4.2 of the Agreement – namely, ratifying the Will and Trust and having Mary sign a waiver of elective share – the Appellants would be in a better position to argue that the omission of Mary from the Will was intentional. Since he didn’t, the court agrees with the probate court that the omission was not intentional.
(It’s worth noting that witnesses at the earlier trial testified Stephen said he still intended for his estate to be handled as described in the Will, and that getting married would not change that. However, the “Dead man’s” statute, SC Code Section 19-11-20, generally prohibits witnesses from providing testimony about conversations with the deceased if they would stand to benefit from it.)
Point #4: Also “hotly disputed.” Brian Ward, one of Stephen’s children, testified in probate court that Mary had received several things during the marriage and after Stephen’s death, including a leased Toyota Camry, a timeshare in Las Vegas, the $17,000 capital percentage from a local club membership, and approximately $13,000 in total. The Appellants argued that these assets were a transfer outside of the will. The court disagreed, saying the value does not approach what Mary would otherwise have been entitled to from an estate valued in excess of $900,000.
The court found that Mary was an omitted spouse under this test.
When a Valid Agreement and Public Policy Clash
“South Carolina treats with great deference a testator’s intent in disposing of his or her property,” says the SC Court of Appeals. Yet it also acknowledges that sometimes a testator’s intent may conflict with public policy.
In this case, there’s no dispute that the Will and the Agreement, which would bar Mary from inheriting anything, were valid. This directly clashes with South Carolina’s protections for surviving spouses from being unknowingly disinherited (read more about elective share) or from being omitted entirely (read more about omitted spouse), which is considered a matter of public policy.
Ultimately, the appeals court AFFIRMED the circuit court and the probate court, which had said that allowing “blanket” provisions to overcome an individual’s statutory rights to the omitted spouse’s share violated public policy.
Alternatives to Irrevocable Wills for Asset Protection
As stated above, we do not use irrevocable wills here at our firm. We use other estate planning tools to accomplish the same goals.
- Life estate deeds allow a surviving spouse to live in the home but ensure the home is passed to a different heir upon the spouse’s death
- Irrevocable trusts remove assets from probate estate altogether
- Testamentary trusts created by the will upon the death of the testator
- QTIP trusts provide income to surviving spouse while reserving assets for children
- Prenuptial or postnuptial agreements to waive elective share
These are just some of the options available. Speak with an estate planning attorney in your state about the right options to achieve your goals.
Personalized Estate Planning
Does your current estate plan reflect your family’s wishes? Are you as protected as you could be? For help creating, amending, or reviewing your estate plan, call Gem McDowell today. He and his team at the Gem McDowell Law Group help individuals and families in South Carolina create comprehensive, customized estate plans that help protect assets, preserve good family relationships, and provide peace of mind. Schedule your free consultation today by calling (843) 284-1021. We have offices in Myrtle Beach and Mt. Pleasant, SC, and are looking forward to speaking with you.
What is Covenant of Good Faith and Fair Dealing? About the How, Not the What, and Road, LLC.
If you sign a contact, you and the other parties signing are automatically subject to the covenant of good faith and fair dealing, an implied principle that holds parties to a standard of fairness and honesty in carrying out the contract.
The covenant does not create or impose new obligations on parties to a contract; it applies to the how of the parties’ behavior, not the what. This is an important distinction that was reinforced in a 2024 South Carolina Supreme Court decision, Road, LLC. v. Beaufort County (find it here), which we’ll look at below.
But first, more about the covenant of good faith and fair dealing, and what it does and doesn’t do.
The Covenant of Good Faith and Fair Dealing
The concept of the covenant of good faith and fair dealing comes from English common law and is now an implied covenant in agreements in American jurisprudence. “Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement,” according to Section 205 of the Restatement (Second) of Contracts, a legal resource on contract law used by legal professionals across the country.
A key aspect of the covenant is that a party must not undermine or interfere with the other party’s ability to fulfill their obligations under the agreement or to benefit from it. A party who intentionally behaves in such a way is in breach of the covenant.
The covenant of good faith and fair dealing does not mean that a contract itself or its terms are fair. That is, just because one party believes the contract isn’t fair, that doesn’t mean the other party has violated the covenant of good faith and fair dealing.
This is the issue in the Road case. Essentially, the plaintiff did not like how a deal turned out, but does that necessarily mean another party breached the covenant of good faith and fair dealing? Let’s see what the court said.
Did Beaufort County Violate the Covenant of Good Faith and Fair Dealing? The Road case
The background to Road, LLC v. Beaufort County (2024) is long and rather convoluted, so we’ll just cover the most pertinent facts here.
In 2006, a developer purchased some undeveloped waterfront property in Beaufort County with the intention of developing it. The 229-acre property is a peninsula connected to the mainland via an access road on a narrow isthmus.
Two lawsuits soon arose from this, one of which was about Beaufort County denying the developer’s request to relocate and improve the access road. Both lawsuits were settled in a 2011 agreement (the Settlement Agreement) which meant the developer could continue developing the property.
Road, LLC (Road) was not a party to the Settlement Agreement. But it stepped in at this point to help out the developer by buying an 0.85-acre parcel of land at the end of the access road from the neighbors for $1.3 million. The developer agreed to buy back that same parcel of land from Road for $5 million once development was complete, giving Road a nice profit.
Here’s where it gets interesting. The developer defaulted on the loan for the peninsula property before developing it, so the lender ultimately took possession of it. Beaufort County then purchased the peninsula property with the express intention of preserving it and not allowing further development.
Road sued.
The Lawsuit: Road Contends Beaufort County Breached the Covenant
Road, LLC and Pinckney Point, LLC (the original 2006 purchaser of the peninsula property) sued Beaufort County, alleging (among other things) that the County breached the implied covenant of good faith and fair dealing. The matter eventually went to the Supreme Court of South Carolina, which issued its decision in May 2024.
Road contended that all parties to the Settlement Agreement expected the peninsula property to be developed eventually, even if not by the original developer. Road also argued that facilitating the development of the peninsula property was, in fact, the purpose of the Settlement Agreement.
By purchasing the land with the express intent of not developing it – and doing so quickly, without allowing another developer the chance to see and purchase it – Beaufort County effectively destroyed Road’s opportunity to sell the 0.85-acre parcel at the expected profit in the future. This, Road contended, constituted a breach of the covenant of good faith and fair dealing.
The question before the supreme court boiled down to this: Did the Settlement Agreement impose an obligation on Beaufort County not to interfere with Road’s opportunity to find another developer for the peninsula property?
The court’s answer: No.
Beaufort County Did Not Breach the Covenant
“The implied covenant of good faith and fair dealing cannot create new contractual duties not already expressed or implied in the contract,” the court said in its decision, which affirmed the result but not the reasoning of the appeals court.
Continuing: “Rather, the implied covenant serves only to govern the manner in which parties to a contract enforce their existing contractual rights and carry out their existing contractual duties—express or implied.”
The Settlement Agreement did not expressly require Beaufort County to give another developer the opportunity to purchase the peninsula land. The court determined there was no such duty from implied contract terms, either, as the Settlement Agreement contained language stating it was the full and complete agreement between parties. Finally, since, in the court’s words, “the covenant may not be relied on to create new contractual duties not expressly stated or fairly implied in the contract itself,” no such duty existed under the covenant of good faith and fair dealing, either.
Additionally, the court says that the purpose of the Settlement Agreement was not to facilitate the development of the peninsula property, as Road contended. It was clearly to settle the two pending lawsuits regarding the land.
Had Road, LLC been a party to the Settlement Agreement, perhaps the court would have interpreted things differently. It might have found that Beaufort County did indeed violate the spirit of the agreement and its intended purpose. We don’t know for sure. But as it is, unfortunately for Road, it took a gamble and lost.
Takeaway: Contract Language Matters
As we’ve covered many times on this blog before, the language in a contract matters. Do not depend on implied contract terms or the unwritten understanding of the purpose of the agreement. If something is important to you, put it in writing.
For help with contracts, business law, and commercial real estate transactions in South Carolina, call Gem at the Gem McDowell Law Group. Gem and his team help start, grow, and sell businesses across the state. Gem has over 20 years of experience solving problems, preventing mistakes, and helping businesses thrive. Call or contact us today to schedule your free consultation.
Spousal Elective Share: What It Is and How to Claim It In South Carolina
“Elective share” is the portion of a deceased person’s estate that a surviving spouse is entitled to under the law in separate property states. A surviving spouse may claim it regardless of the provisions of the will. This concept comes from English common law and prevents a surviving spouse from being completely disinherited.
Here’s what to know about spousal elective share.
A surviving spouse is entitled to a portion of the deceased spouse’s estate.
The amount of the estate a surviving spouse is entitled to varies by state, usually one third or one half. In South Carolina, it’s one third.
Also, in South Carolina, the elective share comes out of the estate subject to probate. In some other states, the elective share is taken from the augmented estate, which includes probate assets and some non-probate assets.
Elective share applies only when there is a will.
Elective share is applicable when the deceased spouse had a will but the will did not leave anything to the surviving spouse or left less than what the elective share would be. A spouse may claim this portion unless the couple previously signed something like a waiver of elective share or a pre- or post-nuptial agreement. Read more about how to disinherit your spouse in South Carolina.
If the spouse dies without a will (aka, dies intestate), then the surviving spouse inherits a portion of the estate – often 50% or 100% – under intestacy laws, which vary by state. Read more about what happens if you die without a will in South Carolina here on our blog.
Some states, like South Carolina, also have an omitted spouse provision. If it’s clear that the spouse was left out of the will unintentionally, then the surviving spouse can claim a portion of the estate that they would have received under intestacy laws. Read more about the omitted spouse provision on our blog.
It is elective – not automatic.
The “elective” part of spousal elective share means the surviving spouse must elect to take it; it is not automatically distributed to the surviving spouse.
The process to claim the elective share varies by state. In South Carolina under SC Code 62-2-205, the surviving spouse must file with the court and inform the personal representative generally within eight months after the decedent’s death.
Get help with wills, probate, estate planning in South Carolina
Gem McDowell is an estate planning attorney with over 20 years of experience helping individuals and families in South Carolina. He and his team will work with you to create a will and an estate plan personalized to you and your family’s circumstances and needs. They also help families after a death by guiding the probate process or help contesting a will when the situation arises. Call Gem and his team at their Myrtle Beach or Mt. Pleasant, SC offices today at 843-284-1021 to schedule a free consultation.
Left Out of the Will – Now What? Omitted Spouse, Pretermitted Child
What happens if you’ve been left out of the will?
It depends – on state law, your relationship to the deceased, and other factors.
Under state law, some parties are entitled to a portion of the estate when the testator has unintentionally left them out of the will. That’s what we’ll look at today.
Disinherited or Omitted?
Were you left out of the will intentionally or unintentionally? While many people use the word “disinherited” for both circumstances, they are different.
Someone left out of the will intentionally has been disinherited. We will cover what to do if you’ve been disinherited in a future blog.
Someone left out of the will unintentionally may be referred to as pretermitted or omitted. Unintentional omission typically occurs when the testator doesn’t update his or her will after getting married or having or adopting a child. The assumption is that had the testator updated the will, the new spouse and/or child would have been included. State law determines what a spouse or child who was accidentally left out of the will is entitled to, and laws can vary greatly by state.
The Omitted Spouse or Pretermitted Spouse
South Carolina law protects the omitted spouse. If it’s clear the spouse was left out of the will unintentionally (rather than intentionally disinherited), the surviving spouse can claim the portion of the estate they would have received under intestacy laws, i.e., had there been no will at all. Read more about the omitted spouse provision on our blog.
Many other states have similar omitted spouse or pretermitted spouse laws. However, not all do, so it’s important to speak with an attorney in your state.
The Pretermitted Child
South Carolina law (Section 62-2-302) also protects the pretermitted child, which is a child who was born or adopted after a will is executed. The pretermitted child is entitled to a portion of the estate that they would have received under South Carolina’s intestacy laws, unless:
- It appears the omission was intentional, or
- The testator left “substantially all his estate to his spouse,” or
- The testator “provided for the child by transfer outside the will” with the clear intention of that being in place of inheritance through the will
If the will was executed after the child was born or adopted, the child is not considered a “pretermitted child” and the above does not apply. The court will assume that the omission was intentional.
Many other states have similar laws, but they vary widely, so check with an attorney in your state.
Other Parties
Only the spouse and child(ren) of the deceased may have a claim under state law, and that varies by state. If you were not named in the will but believe the testator intended to leave you an inheritance, you might want to look into grounds for contesting the will.
Get help with wills, probate, estate planning in South Carolina
If you need help with probate, creating a will, contesting a will, or other estate planning matter in South Carolina, call Gem McDowell. Gem and his team at the Gem McDowell Law Group help individuals and families across South Carolina create estate plans that are personalized to reflect their unique circumstances and wishes. They also help with matters of probate, whether straightforward or complicated. Call Gem and his team at their Myrtle Beach or Mt. Pleasant, SC offices today at 843-284-1021 to schedule a free consultation.
Rights to Land You Don’t Own? Prescriptive Easements and Braswell v. Amick.
A farmer in Newberry County, SC, purchased land that was cut off from the main road. To access his land, he habitually used a dirt road on land owned by a neighbor. This went on for years. At first, the neighbor on the adjacent parcel gave the farmer permission to use the dirt road, but after many years, he no longer wanted the farmer using the road.
Should the farmer have the right to use the neighbor’s land to access his own farm? Or does the neighbor have the right to deny the farmer access to the dirt road on his land?
What do you think?
Easements: Rights to Land You Don’t Own
The scenario above is real, and it’s at the center of the 2024 South Carolina Court of Appeals case Braswell v. Amick (read it here).
The court ruled that the farmer, James L. Braswell, Sr., does have the right to use the dirt road partially located on land owned by his neighbor, James F. Amick.
But why should someone have rights to another’s land? Because of easements. In this case, a prescriptive easement, to be exact.
An easement is the right a party has to land owned by another for a specific purpose. Many common easements, such as utility easements, are typically established by contract, deed, or other legal instrument.
In contrast, a prescriptive easement is not established through documentation but through habitual land use. The party claiming the easement must show open, continuous, and adverse use of the land for a certain period of time to establish the easement.
We previously covered prescriptive easements in a blog here on the Supreme Court of South Carolina case Simmons v. Berkeley Electric Cooperative (2016). The Braswell case aligns with and reinforces the Simmons decision. (Note that the Braswell opinion goes into exceptional detail, but this blog will only address the pertinent background and facts.)
Factors to Establish a Prescriptive Easement in South Carolina
In the Simmons opinion, the court laid out the following requirements for establishing a prescriptive easement in South Carolina:
“In order to establish a prescriptive easement, the claimant must identify the thing enjoyed, and show his use has been open, notorious, continuous, uninterrupted, and contrary to the true property owner’s rights for a period of twenty years.”
Open means the use has not been stealthy or done in an attempt to hide use from the landowner.
Notorious means the use was known by the landowner or widely known in the neighborhood.
Continuous and uninterrupted means use that’s consistent over a long period of time (in South Carolina, that’s 20 years) without large pauses or gaps in use.
Contrary to the true property owner’s rights means use that is somehow disruptive, obtrusive, or otherwise unwanted by the true property owner.
Once a prescriptive easement has been established, the property owner cannot interfere with the other party’s specific rights to the land. For example, the true property owner could not block a road that the other party has rights to under a prescriptive easement.
Braswell v. Amick Background and Decision
For years, Braswell, his sons, his employees, and others accessed the Braswell Property by taking a dirt road partially located on the Amick Property. Amick was okay with this at first, and even gave Braswell a key to the gate he installed on the dirt road after buying the property. Later, he no longer wanted anyone on his property, saying that Braswell started “abusing the situation.”
Braswell then sought a judgment declaring a right-of-way over Amick’s property from Highway 76 to his (Braswell’s) farm. Amick denied the existence of the right-of-way.
The circuit court found in Braswell’s favor. Amick appealed and brought up two main issues the appeals court addressed:
- Was Braswell’s use “open” and “notorious”?
- Can the 20 years of continuous, uninterrupted use include time when the land in question was leased?
Let’s look at both in turn.
Issue 1: Was Braswell’s use “open” and “notorious”?
Amick contended that the circuit court erred by not applying the test set forth in Simmons correctly.
In its opinion, the appeals court says that while the exact words “open” and “notorious” were not used in the circuit court’s order, the circuit court did address whether Braswell used the land in an “adverse” manner under a claim of right contrary to Amick. It determined that he did, and adverse use implies open and notorious use. Therefore, the fact that the lower court failed to use the words “open” and “notorious” does not constitute a reversible error.
Unfortunately for Amick, it was the fact that he objected to Braswell’s use of his land after so many years that allowed Braswell to make the claim of adverse use. If Amick had given full permission to Braswell to use the dirt road, Amick could have raised a defense of permissive use, which would have undermined the requirement of using the land contrary to the true owner’s rights.
Issue 2: Can the 20 years of continuous, uninterrupted use include time when the land in question was leased?
Braswell leased land for a time from Sula Miller in order to run his farm before purchasing the land in 1972. Amick contended that during that time, Miller presumably gave Braswell the right to use the land he now claims a right-of-way on. Therefore, that time period cannot be counted towards the 20 years of “continuous, uninterrupted” use as required to establish a prescriptive easement, since use during that time was not adverse, argued Amick.
The appeals court disagreed. It ruled that Braswell did satisfy the requirement of 20 years of “continuous, uninterrupted” land use to establish a prescriptive easement, as there was no evidence of permissive use at the time in the record. The court also cited previous case law (specifically, Simmons and Kelley v. Snyder [SC Court of Appeals, 2012]) rulings that the 20-year time period can be satisfied by “tacking” together periods of adverse land use on the same land as long as those periods were continuous and uninterrupted.
Additionally, aerial photos from the 1980s show a dirt road on the present day Amick Property running to the present day Braswell Property, countering Amick’s testimony that the land was overgrown and inaccessible for a period of time. “These photographs support Braswell’s claim and the circuit court’s finding that Braswell was able to continuously use the road,” says the court.
You Must Be Proactive in Preventing Prescriptive Easements from Being Established
Ultimately, the SC Court of Appeals affirmed the lower court’s decision in favor of Braswell. He now has the right to use the dirt road partially located on Amick’s land, and Amick can’t stop him from doing so.
If you are looking to establish a prescriptive easement, you can see the factors (listed above) that are required in South Carolina. You can also see that in recent years, some important decisions coming out of South Carolina’s courts have been favorable to parties seeking a prescriptive easement.
But if you are a landowner who wants to prevent a prescriptive easement from being established, you need to be proactive when you see parties using your land. Some options:
- Stop the land use: Post “no trespassing” signs, erect fences or other physical barriers, send written notices to the party using your land to stop, and/or speak with an attorney about legal actions you can take
- Give permission: Allow the party to use the land so the land use is permissive rather than adverse; be sure to document this in writing and provide a copy to the party using your land
- Sell the land: Consider selling part of the land outright to the party using it
(Note: This list is not exhaustive and does not constitute legal advice.)
Once a prescriptive easement is established, it’s hard to have it reversed. An easement on your property can mean loss of privacy, loss of control, inconvenience, and disruption for you. It can also affect your property’s value and your ability to sell it in the future by complicating or clouding the title and turning potential buyers off.
Call Attorney Gem McDowell for Legal Help and Advice
For help with commercial land transactions, contracts, and more, contact Gem and his team at the Gem McDowell Law Group. He helps individuals, families, and businesses in South Carolina from his offices in Myrtle Beach and Mount Pleasant, SC. Gem is a problem solver who can help you avoid mistakes and protect your interests. Schedule an appointment or a complimentary consultation by calling 843-284-1021 today.
Stuck with the Terms: Adhesion Contracts After the Landmark 2024 Huskins Ruling
Adhesion contracts are “take-it-or-leave-it” contracts where the contract-writing party dictates the terms and the contract-signing party has little to no room to negotiate. It’s often a large company writing the contract and an individual consumer signing it. We recently covered the topic in our blog “Can I Get Out of a One-Sided Contract? Adhesion Contracts and Unconscionability in South Carolina,” which you can read here.
The conclusion of that blog was that you usually cannot get out of a contact you signed, and that even if a particular term or clause is not enforceable, the court may simply sever it and enforce the rest of the contract.
But the recent 2024 South Carolina Supreme Court decision in Huskins v. Mungo Homes, LLC, (read the decision here) changes things.
UPDATE 07/26/25: In a similar case, the South Carolina Court of Appeals sided with homebuyers in a dispute with the homebuilder Eastwood Homes. The court upheld a 2024 ruling that found some provisions in Eastwood Homes’ contract unconscionable. One provision allowed the builder to unilaterally cancel a contract if “a bona fide dispute should arise between the Buyer and [Eastwood], in [Eastwood]’s sole judgment,” at any time, right up until closing. Read the court’s opinion here and see a summary from the Post and Courier here (note: P&C has a paywall). This is another win for homebuyers.
The Future of Adhesion Contracts in South Carolina
Up to now, parties drafting an adhesion contract in South Carolina had nothing to lose by including terms that were highly favorable to themselves and unfavorable to the signing party. At best, the parties would adhere to the terms as written and unchallenged, to the benefit of the contract-writing party. At worst, a court might sever the offending term(s) and enforce the rest of the agreement – again, to the benefit of the contract-writing party.
But now, parties insisting on adhesion contracts must be prepared to abide by the contract as written, even to their detriment. In Huskins (2024), the court rejected the idea of severing contract terms that violate public policy in the absence of a severability clause.
This decision will likely affect how companies (in particular, home builders) write their contracts and how courts interpret adhesion contracts in the state moving forward.
That’s the decision and its implications in a nutshell. To understand the court’s reasoning behind this decision, read on.
Brief Background of Huskins v Mungo Homes
Amanda and Jay Huskins (the Huskins) signed a purchase agreement when they bought a house from Mungo Homes, LLC (Mungo) in June 2015. The purchase agreement included the following arbitration clause:
“Each and every demand for arbitration shall be made within ninety (90) days after the claim, dispute or other matter in question has arisen, except that any claim, dispute or matter in question not asserted within said time periods shall be deemed waived and forever barred.”
This clause clearly violates South Carolina law, which typically gives a statute of limitations of three years for such claims, not just 90 days. It also violates South Carolina Code Section 15-3-140 (2005), which renders void contract clauses that attempt to shorten the statute of limitations for claims.
The Huskins filed a complaint over provisions in the purchase agreement, including the arbitration agreement, which they argued violated public policy. The circuit court disagreed; it sided with Mungo and granted its motion to dismiss the complaint and compel arbitration.
On appeal, the appeals court AFFIRMED AS MODIFIED the circuit court’s decision (find that decision here). While it held that the clause limiting claims to 90 days was unconscionable and unenforceable, it also held that the offending section could be severed, allowing the rest of the arbitration agreement to stand.
The South Carolina Supreme Court took up the case in 2024 and REVERSED AND REMANDED the appeals court’s decision. It voided the entire arbitration agreement and remanded the case back to the circuit court.
The Court’s Reasoning
The supreme court went into depth on a number of issues:
Lack of Severability Clause
The court noted that the Mungo Homes contract did not contain a severability clause “or any hint that the parties intended for the arbitration agreement to stand if any part of it fell.”
South Carolina courts are not allowed to rewrite contracts, the court says, and instead are to enforce contracts according to their terms as written: “This is true even when the parties include a severability term. When they do not add such a term, we are reluctant to force one upon them.”
Violation of Public Policy
The appeals court found the clause limiting claims to 90 days was unconscionable and unenforceable.
The supreme court instead found the clause unenforceable because it’s illegal as a matter of public policy. “Because it is unenforceable, we need not decide whether it is also unconscionable. The only question we are left with is whether we should sever the illegal term and let the remainder of the arbitration agreement stand.”
Not Obtained in Good Faith
Courts have routinely stricken illegal parts from contracts and upheld the legal parts. This practice came to the U.S. from English common law and is part of the Restatement (Second) of Contracts.
The Restatement says a court may strike a contract term that’s unenforceable because it violates public policy and enforce the rest as long as:
- The part deemed unenforceable is not an “essential” part of the exchange, and
- The party that wants to enforce the term “obtained it in good faith and in accordance with reasonable standards of fair dealing”
Comments on the Restatement (Second) of Contracts section 184 says “a court will not aid a party who has taken advantage of his dominant bargaining power to extract from the other party a promise that is clearly so broad as to offend public policy by redrafting the agreement so as to make a part of the promise enforceable.”
Was the Mungo Homes contract term “obtained in good faith an in accordance with reasonable standards of fair dealing”?
The South Carolina Supreme Court says three reasons help in determining intent:
- The lack of severability clause
- The existence of a merger clause stating the contract “embodies the entire agreement” which can only be modified or amended in writing by the Huskins and Mungo
- The fact that it is, at Mungo’s own admission, an adhesion contract
On the third point, the court says: “Mungo wrote the contract and deemed its terms nonnegotiable. Huskins could not even edit it. This forceful proof of Mungo’s intent that the contract not be tinkered with convinces us that we should not rewrite it now.” As an adhesion contract, it’s “highly doubtful” the parties intended severability.
“Skirting” of Public Policy
The contract term shortening the time to 90 days from what’s typically three years is not an ancillary matter, but “a brash push” to use arbitration to do something that South Carolina statute forbids.
The court says that rather than including the arbitration provision as an alternative method to resolve disputes, Mungo included it to cut down the number of disputes entirely by drastically reducing the time frame in which to bring a claim. “We conclude Mungo’s manipulative skirting of South Carolina public policy goes to the core of the arbitration agreement and weighs heavily against severance.”
For Help with Contracts and More
The “take-it-or-leave-it” nature of the purchase agreement originally put the Huskins at a disadvantage, but now “Mungo is stuck with its choice,” in the words of the court.
This case highlights the importance of contracts. You must understand the terms of the contracts you sign. And if you’re the party writing the contract, avoid including terms that violate public policy and consider including a severability clause.
For help with contracts and other business-related legal matters such as creating governance documents, buying or selling a business, or starting a new business in South Carolina, contact Gem McDowell. Gem and his team at the Gem McDowell Law Group help business owners across the state solve problems, avoid mistakes, and grow their businesses, with offices in Myrtle Beach and Mount Pleasant, SC. Call today to schedule your free consultation.
What Is the Legal Rate of Interest in South Carolina in 2025?
On January 6, 2025, the Supreme Court of South Carolina issued an order regarding interest rates on money decrees and judgments for the upcoming year. The legal rate of interest for money decrees and judgments in South Carolina is 11.50% compounded annually for the period between January 15, 2025 and January 14, 2026. (Read the original order in PDF format.)
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). The law also provides that the SC Supreme Court updates the interest rate every year by January 15th.
Compare with the legal rate of interest in 2024.
