A Conversation with Jennifer MacLeod of Ellis, Lawhorne & Sims on Estate Planning

MidlandsBiz:
Tell me about yourself and what you do.

Jennifer MacLeod:
I was born and raised in Columbia and majored in accounting at the University of South Carolina. When I graduated, I decided to earn a law degree and tax law became my passion. After earning my Juris Doctor from the USC School of Law, I earned an LL.M. from Georgetown University in Tax with a Certificate in Estate Planning. I am now an attorney with Ellis, Lawhorne & Sims in Columbia, and focus my practice on estate planning.

MidlandsBiz:
Who is the “typical” client for a will or estate plan?

Jennifer MacLeod:
There is no typical client for an estate plan. We see older adults, young couples with children, and everyone in between who wants to plan for the future, whether the goal is to minimize estate taxes or to protect one’s children in the event of death.

MidlandsBiz:
What are the main reasons for having an estate plan?

Jennifer MacLeod: 
In the past, minimizing estate taxes was the driving force for having an estate plan. Currently, there is a fair amount of uncertainty regarding estate taxes. The estate tax exemption, which is the amount of assets you can leave to your beneficiaries without paying any estate tax, has been increasing since 2001 and this year, for one year only, there is no estate tax. Unless Congress acts to change the law, the exemption will only be $1 million in 2011, which is substantially different than the $3.5 million exemption we had in 2009.

That being said, people who want to control how their assets are dispersed or managed upon their death want estate plans. While you can’t take it with you, you can certainly choose who gets what and when.

MidlandsBiz:
What happens if you don’t have an estate plan?

Jennifer MacLeod:
The State of South Carolina has written a will for its citizens. In general, if you are married and have no children, all of your assets go to your spouse. If you’re married and have children, half of your assets go to your spouse and the other half goes to your children. If you are single with children, they get everything. It’s important to note that adopted children are treated as natural children, but stepchildren are not. The state’s plan goes down the family tree before going back up to include siblings, parents or other family members.

MidlandsBiz:
Where does the state’s plan fall short and potentially cause problems?

Jennifer MacLeod:
The state’s plan is a very general approach that doesn’t take into account friends, charities or business interests, for example. One of the bigger potential problems relates to minor children and how and when assets are distributed. If there is no estate plan, the Probate Court appoints a conservator for minor children, even if there is a surviving parent, whose role is to oversee how money is spent. This is a very compelling reason for having an estate plan. Parents with minor children should appoint a legal guardian who will have physical custody of the children and set up trusts that govern the distribution of assets so children get them at an appropriate age. For example, the child might receive one-third at age 25, one-third at 30, and the final third at 35. This way the inheritance does not become a disincentive to getting an education or a job. Parents with adult children may also want a trust to govern distributions to their adult children. Children with special needs also have unique considerations to address in an estate plan.

MidlandsBiz:
Must you include your spouse in an estate plan?

Jennifer MacLeod:
There are certainly cases where husbands and wives don’t want their spouse to get a penny. However, South Carolina law doesn’t allow you to totally disinherit a spouse. By law, a surviving spouse is entitled to one-third of the assets of the deceased spouse. There are cases where spouses prefer to direct their assets elsewhere. This is most common with individuals who have been married before and prefer to leave their estates to their children from a prior marriage. There are several planning options to deal with this issue. The spouses can execute an elective share waiver that waives the right of the surviving spouse to the deceased spouse's estate. Or, the spouses can have documents that create elective share trusts, where a portion of the estate is put into a trust and the income goes to the spouse.

MidlandsBiz:
Should both spouses have an estate plan?

Jennifer MacLeod: 
Absolutely! It is generally most effective for the spouses to work together during the estate planning process on a common plan. When the spouses work together, we can ensure that we create a plan that works no matter which spouse dies first. Also, the most common way to minimize the impact of estate taxes is to use the unlimited marital deduction for transfers between spouses to defer estate taxes until the second death, coupled with full utilization of the estate tax exemption to possibly eliminate the estate tax altogether.

MidlandsBiz:
How are family-owned businesses handled in an estate plan?

Jennifer MacLeod:
People typically think about and plan for personal assets like money, insurance policies and homes. However, if you’re a business owner or a professional, you also need to consider business continuation issues. By that I mean, do you want the business to continue after your death? If so, you have to plan for it. Do you want it to stay in the family or have someone else run it? There’s also the issue of liquidity. One child may be interested in running the business while another wants cash. There are things you can do that satisfy the desires of both children and maintain family harmony, but you have to have a plan.

MidlandsBiz:
Is it costly to do an estate plan?

Jennifer MacLeod: 
An estate plan is like almost everything in life, you can choose the economy model or the luxury model. At Ellis Lawhorne, we explain many options to clients, starting with the most simple estate plan up to the complex, as appropriate for their circumstances. We also explain that an estate plan is an investment; you are planning for the future, and in many respects, planning for the unforeseen. We take a thorough approach that considers family dynamics and potential issues going forward, and as a result, each plan is  tailored to the individual client. The result is a solid plan that can be modified as the client’s life circumstances change.

MidlandsBiz:
What documents are necessary in a good estate plan?

Jennifer MacLeod:
In our firm, we like to make sure our clients are covered both during their lifetime and at their death. We generally have our clients execute advanced health care directives to cover medical decisions that might have to be made if they are incapacitated, durable powers of attorney to cover financial and legal decisions that will need to be made during their lifetime, and documents that will dispose of their assets at their death, including wills and revocable trusts. We have found that in many instances, the lifetime documents such as powers of attorney are just as important as the documents that will control after your death.  

MidlandsBiz:
What is the most important advice you give to clients?

Jennifer MacLeod:
Two things: First, name people who you trust in the important positions in your documents. These people will have tremendous power upon your incapacity or death. Second, talk to the people named in your estate planning documents so they understand your wishes and will abide by them. For example, you should definitely talk with the trustee you name to handle money for your children as you may want your children to attend a particular school or to get regular distributions from the estate. I think that, in general, it is a good idea to talk to your family members about your plan so they know what to expect. Surprises often lead to family members being hurt and angry. You can easily turn an ordinary, happy family into a dysfunctional family if you don’t talk about your plan and your wishes.

MidlandsBiz:
Do you have an estate plan?

Jennifer MacLeod: 
Of course!

 

 

Jennifer R. MacLeod
Associate

Jennifer Ross MacLeod is a member of the Trusts and Estates Practice Group and focuses her practice in estate planning and trust litigation. Jennifer earned her Bachelor’s of Science in Business Administration from the University of South Carolina Honors College, cum laude, in 2002. She earned her juris doctor from the University of South Carolina School of Law in 2005, and an LL.M. in Taxation with a Certificate in Estate Planning, with distinction, in 2008 from Georgetown University Law Center.

Prior to attending Georgetown University Law Center, Jennifer was employed as a staff attorney with the South Carolina Supreme Court and as a law clerk for the South Carolina General Assembly’s Senate Judiciary Committee.  She is a member of the South Carolina Bar.