South Carolina Trust
and Estate Law Blog

A part of estate planning that is sometimes overlooked is the naming of beneficiaries for retirement accounts. What may seem like a trivial exercise can have damaging impact if neglected. Be sure to name beneficiaries of your retirement accounts. And be sure to name contingent beneficiaries in case your primary beneficiary dies before you.

In Private Letter Ruling 201612001 (released March 18, 2016), the IRS was asked to provide an opinion on the following situation: Husband died owning an IRA account. His spouse survived him. The primary named beneficiary (not the spouse) died before Husband. There was no contingent beneficiary named. As a result the Husband’s estate became the beneficiary of the retirement account. The Surviving Spouse then requested the IRS’s opinion on whether she could treat the IRA account as her own, thus potentially delaying the payment of income taxes on the account. In this case, the IRS stated that because the Surviving Spouse was both the executor and the sole heir of the estate, she could treat the IRA account as her own.

You might be asking then what is the problem? The IRS said the Surviving Spouse can treat the account as her own and delay the payment of income taxes. Let’s assume for a moment that it was Husband’s intent for his Surviving Spouse to receive that account if his primary beneficiary died before him. The problem is that it is expensive to obtain a Private Letter Ruling from the IRS. There are IRS filing fees as well as attorney’s fees that will be incurred. This is not a good use for estate funds, when it could have easily been avoided.

It also takes time to get the ruling. In this case, the request was made about 11 months before the decision was rendered. Perhaps it also took a few months to prepare the request, and another few months on top of that to even realize that a Private Letter Ruling would be necessary. Lastly, an IRS Private Letter Ruling is not a precedent for any other taxpayer. Another taxpayer could not rely on this decision if they are in the same situation.

Consider though if it was not Husband’s intent for his Surviving Spouse to receive the IRA, then his intent was frustrated by not having named a contingent beneficiary. When you undertake estate planning, it is important to make sure there are no potential issues with your beneficiary designation forms, so get your attorney’s input when naming your beneficiaries. We have the experience to know what can possibly go wrong.

While a number of states (South Carolina included) have introduced legislation to adopt the Uniform Fiduciary Access to Digital Assets Act, only three have actually adopted it thus far. The first was Delaware, which adopted it on August 12, 2015, effective January 1, 2015. Second was Oregon, adopted on March 2, 2016, effective January 1, 2017. Now Wyoming makes the third, which adopted the uniform law on March 7, 2016.

The Uniform Fiduciary Access to Digital Assets Act allows personal representatives, executors, guardians/conservators, and persons acting under a power of attorney to have access to digital accounts of a decedent or incapacitated person. The law is intended to make it easier to gather the digital assets and get access to them to administer a decedent’s or incapacitated person’s estate. Nowadays, an important part of estate planning will be focused on generating a list of digital assets and providing the ability for our designated agents to obtain access to the digital assets when necessary. Other bills are pending around the country, so it is expected that this uniform law will be adopted somewhat rapidly.

South Carolina has a bill currently pending in the state legislature. You can find it here. It will be interesting to see if this bill can move forward, particularly when lots of attention seems to be on the highway bill and gas tax proposal. I am unsure however how effective this bill will be. The various terms of services agreements users accept when using online services can potentially take the effectiveness out of this law. This will be a fascinating area of estate planning and probate to watch in the coming years.

Check out this prior post for some examples of why this bill can be so important.

The Social Security Administration recently issued an Emergency Message to all personnel requiring workers to specifically inform SSI applicants or beneficiaries of the reasons a special needs trust has been rejected by the agency. And elder law attorneys everywhere say thank you!

In the past, when the SSA determined that assets in an SSI beneficiary’s or applicant’s trust were countable, the agency would frequently send a notice of ineligibility to the beneficiary or applicant because his/her assets exceeded the resource limit. However, this notice almost never explained the reasoning behind the SSA’s rejection of the trust.

The new Emergency Message, which went out to all field level SSA personnel, requires caseworkers to spell out exactly what portion of the Program Operations Manual System (POMS) applies to the trust being rejected. Unfortunately, the Emergency Message does not tell field workers that they have to explain their reasoning in plain English — merely citing the appropriate section of the POMS appears to be enough. While this will make it relatively easy for professionals to determine what went wrong with a trust and whether an appeal is in order, it will likely give the layperson little if any guidance about his or her trust.

To read the Emergency Message, go here.

The stories are starting to become more frequent and familiar. They generally involve grieving families trying to access their deceased loved one’s online accounts, social media, or even devices such as iPhones and iPads. Those of us who are online are likely to amass a great deal of data, such as messages, emails, voice mails, photos, passwords, music, and videos on our devices and in the cloud, which can become painfully out of the reach of our loved ones after our lifetimes. It can be difficult to even obtain a password to access an iPhone or iPad of a deceased loved one without a court order. Add on top of this the frustration of each online service provider instituting it’s own policy for providing access to our loved ones’ accounts, you can easily see that this is a situation we would want to avoid.

See the links below for recent examples:

Widow Needed A Court Order to Access iPad

A Legal Showdown With Apple To Access iPhone Photos

Is there anything you can do to plan for allowing your family access to your online life, if that is your wish? Of course there is. I will talk about that in Part 2 of this post.

Since it is the giving season, let’s talk estate and gift taxes! The IRS recently announced the new estate and annual gift tax exclusion amounts for 2016. In 2016 the estate tax exclusion amount will be increased to $5.45 million per individual estate, which means a married couple can shield up to $10.9 million from estate taxes. The annual gift tax exclusion amount remains at $14,000.00 per donor per individual recipient.

These amounts had originally been set at $5 million and $13,000.00 respectively, by The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 enacted on December 17, 2010, since indexed to inflation by the American Taxpayer Relief Act of 2012 enacted on January 2, 2012.

If you anticipate that your estate (including life insurance, retirement benefits, and inheritances you might receive from others) may be above $5.45 million individually, or above $10.9 million as a married couple, you should consider a thorough estate planning review. There are often ways to help reduce or even eliminate estate and gift tax liability through careful estate planning.

You can see the IRS announcement here..