The Swier Law Firm Estate Planning and Probate Law FAQs

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The state of South Dakota actually tries to replicate what it thinks think you would have wanted to happen with your assets, even if you didn’t say what you wanted. If you die without a Will (known as dying “intestate”) your assets will pass in accordance with South Dakota law. The law starts by looking for people in your life that were closest to you. If you had a spouse, your money will start there. In South Dakota, if you had no descendants or if all your descendants were also descendants of your spouse, then your assets will pass to your  spouse. If you had descendants that were not from your spouse then your assets will start to be divided among different people in percentages.

Despite the state trying to replicate what you would want, it still is much easier to distribute your assets if you have a valid Will at the time of your death. Even if you end up distributing things exactly how they would otherwise be distributed under state law, dying with a Will helps expedite the entire process of probating your estate – it leaves no doubt as to where you want your assets to go to and also helps in naming the personal representative (or executor) put in charge of sorting it all out.   

 

Although the term “estate planning” can sound intimidating, it simply means planning for what will happen with your assets once you pass away.  Believe it or not, nearly everyone has an “estate.” Your estate includes everything you own – your car, home, other real estate, checking and savings accounts, investments, life insurance, furniture, personal possessions. And no matter how large or small your estate may be, everyone has something in common – you can’t take it with you when you die.

 

When that happens, you want to control how those things are given to the people or organizations you care most about. To ensure your wishes are carried out, you need to provide instructions stating whom you want to receive something, what you want them to receive, and when they are to receive it. However, estate planning is often more complicated if you have an autistic child.

 

First, your autistic child likely has greater needs. Depending on where your child falls on the spectrum, he may require specialized treatment that includes therapy, housing, education, adaptive equipment, and many other services. The need for this care may be lifelong. Providing the appropriate care requires careful estate planning.

 

Second, estate planning is the only way to ensure that you can provide for your child without jeopardizing his eligibility for government and private benefit programs.

 

Finally, estate planning is the only way to protect your child’s financial interests today as well as in the future, when you may no longer be able to help. 

Under South Dakota law, if you pass away without a will you are:

• Surrendering to the state of South Dakota the important decisions affecting the well-being and future security of your family
• At risk of having your property divided in a way that's not to your liking
• Foregoing any opportunities to reduce your taxes

What Does Jointly Held Real Estate Mean In Estate Planning?

Real estate is commonly a joint asset.  There are three ways to be joint owners of real estate.  Each is different in what happens at the death of one of the joint owners.  The way a deed is written and recorded will determine how the real estate is held.

Example Of Jointly Held Real Estate In Regards to Estate Planning

Real estate is commonly a joint asset.  There are three ways to be joint owners of real estate.  Each is different in what happens at the death of one of the joint owners.  The way a deed is written and recorded will determine how the real estate is held and passed.

The "basis" of an asset is what a person has paid for an asset together with money invested in an asset after purchase This determines gain/loss for income tax purposes.

A "stepped-up basis" occurs when assets get a new basis when they are passed by inheritance (through will or trust). These assets will be re-valued as of the date of death of the owner.

If the value of the asset has gone up in value since purchase, the new owner will take that asset with a new basis equal to the current value without paying tax on that increase. This has the potential to save a significant amount of capital gains upon sale in the future and can be a good way to do some strategic estate planning.

Example: My mom bought real estate in 1950 for $25,000. When she died last year it was appraised at $500,000. I received that real estate from her estate and my basis is now $500,000 tax-free. If my mom had sold this real estate before she died she would have had to pay taxes on $425,000 of gain, but because she died with the property I received a "step-up" in basis to the current value.

The "basis"of an asset is what a person has paid for an asset together with money invested in an asset after purchase. This determines gain/loss for income tax purposes.

Example: You purchased your house for $100,000, but have since had to put on a new roof for $3,000, you added on a garage for $10,000, and updated the windows for $4,000. Your new basis in your house is now $117,000 ($100,000 + $3,000 + $10,000 + $4,000).

The "basis" of an asset is what a person has paid for an asset together with money invested in an asset after purchase This determines gain/loss for income tax purposes.

A "stepped-down" basis is the same as the "stepped-up" basis - except the asset has gone down in value since it was purchased. The new owner would take that asset with a new lower (stepped-down) basis. This depends on the value as of the date-of-death of the owner compared to the price the owner originally purchased the asset.

Example: Dad was convinced that AOL was going to make a comeback. He bought it for $50,000 and it’s now worth $10,000. Instead of selling his AOL stock at a loss during his lifetime he held onto it. I now own it with a basis of $10,000.

A South Dakota "trust company" is an institution specializing in the management of trusts. There are lots of trust companies in South Dakota because of the favorable trust laws of our state. They serve as a corporate trustee and can have roles ranging from specific to general depending on the needs of the family. These roles can change over the years.

Example: When we formed our South Dakota trust we had to hire a South Dakota trust company as the trustee so we can take advantage of South Dakota law, but we still have a lot of control over all the assets. It’s a win-win situation.

Our law firm is often asked, “What happens if someone dies without a Will?” The answer is that you will have made very significant (and likely unwise) estate planning decisions. If you die without a Will, South Dakota law dictates who gets your property. These laws are known as the laws of intestate succession.  

 

In other words, if you die without a Will, the State of South Dakota has written a Will for you. The State also determines who gets your property, who will manage your estate, and who will serve as guardian of your minor children. Often, the State’s laws in these areas do not reflect what you would have really wanted.    

A "Spendthrift Clause" is a clause added to a trust to protect assets in that trust from a beneficiary’s creditors or to prevent assignment of an inheritance before it is received. This can include protection from a spouse in divorce.

Example: My dad put a spendthrift clause in his trust so even though I was supposed to get distributions already, the trustee won’t give me any money because I’m in the middle of a nasty divorce and they don’t want it taken from me.