Probate Explained

Memorandum Concerning Duties and Responsibilities of a Personal Representative by Michael J. Howell


Memorandum to Personal Representatives PDF

“But I don't want to go among mad people," Alice remarked. "Oh, you can't help that," said the Cat: "we're all mad here. I'm mad. You're mad." "How do you know I'm mad?" said Alice. "You must be," said the Cat, "or you wouldn't have come here.”

Alice, The Queen of Hearts And Probate In South Carolina (With Apologies to Lewis Carroll) By Michael J. Howell

One day recently the Queen of Hearts and Alice of Alice in Wonderland fame were talking.  Alice asked the the Queen this question:

"What is a probate asset?"

The Queen replied:
"You silly person, it is any property or interest in property which is disposed of by will or by intestacy, if there isn't a will?"

Alice then asked:

"OK, so what does that mean?"

The Queen then said:

"Well, you ignorant person, you first just define what non-probate property or interests are and then the rest are probate assets."

Alice then asked:

"Ok, so what is a Non-Probate Asset?"

The Queen then said:

"Are you a moron? It is any property or interest in property which is NOT disposed of by will or by intestacy, if there is no will."

Alice then asked:

"Alright. I give up, what does that mean?"

The Queenr, then replied:

"Well, being more specific, Alice, non-probate assets are:

-Assets Owned as Joint Tenants with Right of Survivorship (JTROS), which means that they automatically pass to the survivor or survivors upon the death of the first co-owner.

-Assets Owned As Tenants by the Entirety, which is property that also passes to the survivor upon the death of the of the other co-tenant.  However, such ownership also provides asset protection in other states like North Carolina, Florida, Virginia and New Jersey but not in South Carolina.  Such ownership can only be between a husband and a wife.

-Assets Controlled by beneficiary designation, such as life insurance policies, annuities, 401(k)s, Individual Retirement Accounts, and other pension like assets, assuming they are payable to a named beneficiary other than your estate.

- Securities and brokerage accounts owned in Transfer on Death (TOD) form.  This means that when the owner dies, the assets go to the person or persons who are designated the receive the assets upon the owner's death.  During the owner's life, he or she has complete control of the assets and can do with them as he or she pleases and can also remove the TOD designation or change those to receive the assets.  It just so happens that if there are any assets left at death, those designated with receive them.

-Bank account owned in Payable on Death (POD) form.  These are treated basically the same as Transfer on Death or TOD accounts, but with a bank rather than a stock broker."

Alice then asked, the Queen:

What is Probate?

By this time the Queen was becoming impatient and blurted out:

"You ignoramus. It is the somewhat expensive process of transferring probate assets at death through the Probate Court to those persons entitled to the assets by your will or by intestate succession, if you do not have a will."

Alice then sensing the Queen’s frustration decided to ask several questions all at once and asked:

"How long does it take, what is the purpose of it and why is it so expensive?"

The Queen, then said:

"My dear, it normally takes 12-18-24 months or longer. It is labor intensive, and it protects creditors and not just those to whom you leave your assets."

Alice, then stated:

"But I thought it had something to do with taxes."

To which the Queen replied:

"You idiot, everyone knows that probate administration is often confused with tax administration, which sometimes includes Estate Tax Returns, Gift Tax Returns, the Decedent's Individual Income Tax Returns, Fiduciary Income Tax Returns and can include other returns. Keep in mind that  creditors including the IRS and the South Carolina Department of Revenue are being protected by probate."

Alice then asked:

"How do you Avoid Probate or at least most of it?"

To which the Queen replied:

"Own no real estate and less than $25,000 in probate assets other than real estate.

Own all property as JTROS, tenants by the entirety, payable or death (POD) accounts, or transfer on death (TOD) accounts.

Make beneficiary designations for Life Insurance, Annuities, IRA, etc. to someone other than your estate.

Own property in trust.

However, Alice, all the above can create estate, income and gift tax issues, if you are not careful."

Trying not to upset the Queen any more than necessary, Alice then sheepishly asked:

"Are there any other costs if you avoid Probate?"

By this time, the Queen was beside himself and shouted:

"Of course, Alice.  Even without probate there are costs, including debts, taxes, legal fees, accounting fees and other administration expenses.  Obviously someone has to pay them if there are assets. Now, the Uniform Trust Code (UTC) even makes Revocable Trust assets liable for debts for up to one year after the date of death of the Settlor, if there are insufficient probate assets."

Alice, by now in a panic, asked:

"Who can I turn to for help in planning my estate to avoid the probate and tax problems?"

To this, the Queen smiled and responded gently:

"Now Alice, that is the easy part.  Just review  the information on this website and give The Law Office of Michael J. Howell, P.A. a call at 843-785-7590, if you have any further questions.  They are there to help."