South Carolina Trust
and Estate Law Blog

This installment of South Carolina Estate Lawyer A to Z continues with the theme of retirement accounts. Defining the term JOINT AND LAST SURVIVOR TABLE requires a small amount of background about retirement accounts.

As you may know, federal tax law allows for the deferral of income taxes for compensation income that is placed into traditional IRAs or into qualified retirement accounts such as 401Ks. While federal law allows this tax deferral for a time, the law does not grant deferral forever. What the law gives it does eventually want to take back.

Participants in these tax advantaged accounts are required to begin taking distributions from these accounts in the year that they reach age seventy and a half years. The distributions thus taken are then subjected to income taxes.

The calculation of these required distributions, officially termed Required Minimum Distributions, is relatively simple to accomplish. You simply obtain a divisor from an IRS published table called the Uniform Lifetime Table and divide the prior year end account balance by the applicable divisor and the result is your Required Minimum Distribution.

For example, suppose I turn 74 years of age in the year 2012, and as of December 31, 2011 the balance in my traditional IRA is $150,000.00. From the Uniform Lifetime Table, the divisor for a person who is age 74 is equal to 23.8. To obtain my year 2012 Required Minimum Distribution, I would divide $150,000.00 by 23.8, for a result of approximately $6,302.00. Thus in the year 2012 I would be required to withdraw $6,302.00 from my traditional IRA account and pay the income taxes on it. If I failed to take the distribution, I would be assessed a penalty excise tax of 50% of the amount not taken, in this instance $3,151, plus have to pay the income taxes when I did eventually take the distribution. Neglecting to take your required minimum distributions can be a costly error.

To learn what the JOINT AND LAST SURVIVOR TABLE is used for, you need to understand what the Uniform Lifetime Table is. The Uniform Lifetime Table is actually obtained from the combined life expectancy of the account participant plus that of a hypothetical beneficiary exactly age ten years younger than the plan participant.

The JOINT AND LAST SURVIVOR TABLE (and you have got to love the optimism of our Congresspeople here) is a table that can be used when the plan participant names as beneficiary his or her spouse who is greater than ten years younger than the participant. For an example of the JOINT AND SURVIVOR TABLE follow this link.

The divisors obtained from this table are more generous than the Uniform Lifetime Table. Let’s see how the use of the JOINT AND LAST SURVIVOR TABLE would have affected my example above. Again, suppose I am 74 in the year 2012, but that my spouse is named as my primary beneficiary and she is age 58. Looking at the table at the link above, we look across the top for age 74, and then go down to find my spouse’s age 58. Here, the divisor would be 28.1. Lets divide $150,000.00 by 28.1 for a Required Minimum Distribution of approximately $5,338.00. Thus, the use of the JOINT AND LAST SURVIVOR TABLE results is a lower Required Minimum Distribution. This table is more generous because it is assumed that because the beneficiary spouse has a much longer life expectancy the account should last for a longer time. Reducing the amount required to be taken from the account will accomplish this goal.

Like any decent lawyer, I need to add a disclaimer here: unfortunately, it is impossible to offer comprehensive legal advice over the internet, no matter how well researched or written. And remember, reviewing this website and my blogs doesn’t make you a client of my Firm. The rules regarding retirement accounts do change, are highly fact specific, and errors can be extremely costly. Before relying on any information given on this site, please contact a legal professional to discuss your particular situation.

Oh, and the IRS would like me to let you know that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.

Installment H of Estate Lawyer A to Z is HEIRS. What is an heir? Most people think that an heir is somebody that will inherit your property after your lifetime. This is sometimes true, but sometimes it is not true. The term HEIR is defined by South Carolina Code Section 62-1-201(17) as being “those persons, including the surviving spouse, who are entitled under the statute of intestate succession to the property of the decedent.” The SC Code drafters were not being very original inasmuch as Blacks Law Dictionary, Seventh Edition, defines an heir as “[a] person who, under the laws of intestacy, is entitled to receive an intestate decedent’s property.”

So it seems that in order to know what an heir is we need to know what intestacy and an intestate decedent is. Intestacy is simply the default inheritance scheme that takes effect when a person dies without a Last Will and Testament. An intestate decedent is a person who dies without leaving a Last Will.

So what is an HEIR? An heir is a person who is entitled, by default, to a decedent’s property when the decedent leaves no Last Will. So which of our family members are our heirs? I will discuss this in my next post where I will discuss INTESTACY in more detail.

There are actually different types of heirs depending on the circumstances. One type is the forced heir … a person who you are forced to leave an inheirtance to, such as your surviving spouse. Another type is the after born heir … a person who is entitled to receive an inheritance despite having been born after the death of the decedent. Another type is referred to as the laughing heir … a person who is distant enough on the family tree from the decedent to feel no grief when the decedent passes away leaving a windfall to the heir.

So, in what situation does an heir not inherit a decedent’s property? This occurs of course when the decedent leaves behind a Last Will that directs that a person other than an heir is to receive the inheritance.

Like any decent lawyer, I need to add a disclaimer here: unfortunately, it is impossible to offer comprehensive legal advice over the internet, no matter how well researched or written. And remember, reviewing this website and my blogs doesn’t make you a client of my Firm: before relying on any information given on this site, please contact a legal professional to discuss your particular situation.

Every now and again I like to post a warning re: scams targeting lawyers and financial managers. This scam was one that I had not heard about before.

I was recently contacted by a financial adviser/trust manager acquaintance of mine located in another state. He relayed to me that he had recently been contacted by a person who stated that he was a resident of South Carolina, but currently had construction work located in another country. The person said that he anticipated that when the work was finished he would be moving to the state where the financial adviser was located. The person wanted to transfer his mutual funds of several million dollars to my acquaintance’s bank for investment management services.

I was contacted for help in possibly drafting a revocable grantor trust-type document to transfer the funds to, with the bank as the investment manager. When I heard the story it just didn’t seem right to me, why would this person be initiating a transfer of assets while he was out of the country? I think whenever I find out that a potential client is located in another country my suspicion increases. Anyway, a few weeks later my acquaintance informed me that the person who had contacted him was not the person he said he was, but was in actuality an imposter/identity thief who was attempting to have the bank transfer the assets out of the control of the real owner, a real person who actually resides in South Carolina. Luckily, the fraud was discovered before any transfers were initiated.

I’ve said it before and I’ll say it again, it’s a jungle out there. From financial fraudsters and schemers, to marketers trying to sell you useless junk or unethical services, you need to be careful in this business. More and more we see fraudsters and identifty thieves targeting those considered to be sophisticated enough to know better. And sometimes it works. Luckily in this instance it did not.

This is a continuation of my blog on South Carolina trusts and estates law. All of my prior posts will continue to appear at South Carolina Trusts and Estates Law Blog, but all future posts will be placed here. Be sure to check back soon for new content covering South Carolina Trusts and Estates Law.