Nashville Estate Planning Law

What does an Executor do?

Sat, 21 Apr 2012 21:05:00 GMT

Q: What do I have to do if I am Executor of the estate for my parent, spouse, or sibling?

A: Being an executor can be a big job, depending on the assets in the estate and the family dynamics. This is a general list of the tasks required.

1. Finding the Last Will and Testament and hiring a lawyer to help with the probate and estate administration.

2. Probating the Last Will and Testament in Probate or Chancery Court with help of the estate lawyer.

3. Gathering and protecting estate assets. You can do this once you have Letters Testamentary from Court showing legal authority to collect assets. Also requires getting a tax ID number and opening a bank account for the estate.

4. Making an inventory of estate assets. Make sure you identify and collect everything the deceased person owned. Good record-keeping is a big part of the job.

5. Determining value of estate assets. You must determine value of each asset on the date of death. This information gets reported on estate and inheritance tax returns.

6. Acquiring legal title to assets in the name of the estate. For stocks and bonds, this means a lot of paperwork required by stock transfer agents and financial institutions.

7. Paying debts, taxes, and estate expenses. These must be paid before anything is distributed to beneficiaries.

8. Deciding what cash is needed to pay debts, taxes and expenses, and raising the cash by selling assets if necessary.

9. Making decisions on tax issues. Some decisions can be made after death that will save taxes for the beneficiaries. Getting good tax advice from a lawyer or accountant is important.

10. Filing tax returns. Several tax returns may be required: individual 1040, federal estate tax return, state inheritance tax return, estate income tax return for each year open.

11. Keeping beneficiaries informed of your progress in the estate administration. The best way to avoid conflict and misunderstandings among beneficiaries is to keep everyone fully informed.

12. Managing estate assets. Some estate property (like clothing) may be donated to charity. Other tangible items may be divided between beneficiaries or sold at an estate sale. Real property may have to be readied for sale and put on the market.

13. Paying bequests. Specific bequests to individuals or charities are usually paid before the residuary beneficiaries receive their share.

14. Transferring assets to Trustees (if required). Sometimes the Will directs that a trust be created to hold assets for the benefit of a surviving spouse or children. The Executor must make sure that the Trustee receives those assets.

15. Preparing Final Accounting and distributing all estate assets. Wrapping up the estate requires accounting for all of the estate assets and making final distributions to the beneficiaries.

The job can take anywhere from a year to several years depending on the estate and any problems encountered during the administration process. This is a job that requires follow-through, attention-to detail, perseverence and good organization.

Estate Planning is an on-going process

Sun, 14 Aug 2011 17:15:00 GMT

Recent events have reminded me that we all need to review an existing Will or trust every few years as life changes around us. The friend you appointed as Executor may prove to be less trustworthy than you thought, or your grown child may seem to be developing a drinking problem, or your adored daughter-in-law has filed for divorce from your son. People grow and change, and we sometimes find that our assumptions or predictions about the future are no longer valid.

The changes in the economy and losses in the stock market have brought several people to my office to reduce the charitable requests in an earlier Will. With a smaller estate they find that they cannot be as generous to charitable organizations and prefer to leave a larger amount to their children.

Estate planning is not a one-time thing. It is an ongoing process that should be revisited and re-evaluated from time to time. Your plan should be individualized, tailored to your assets and to suit the changing needs of your family. Your plan should change as your life and your family changes. Your plan is always subject to change, as long as you are living and have the mental capacity to make the changes needed.

More tips for avoiding a fight over your estate

Mon, 06 Jun 2011 01:14:00 GMT

More tips for avoiding a fight over your estate:

As an estate planning attorney, one of my primary concerns is to help my clients avoid the possibility of a Will contest. It can take a family generations to recover from the damage to family relationships that can occur in a Will contest or other type of litigated estate matter. The cost of having documents properly prepared and executed is a small matter compared to the cost of a will contest or other litigated probate matter. Below are a few additional tips for avoiding a fight over your estate.

- Assets should be correctly titled. Sometimes a parent adds an adult child’s name to a bank account so the child can help with check writing. Making another person an "authorized signer" is not the same as making that person a joint owner. If the intention is not clearly stated at the bank, they can end up with the child added to the account as a joint owner with rights of survivorship. Joint ownership means that the account does not pass under the Will but instead passes to the surviving joint owner. This can unintentionally wreck a plan for everything to pass equally to children under the Will.

- Will should be properly executed. The signing of the Will must be done correctly or the Will is not valid. Make sure your Will has at least 2 witnesses who are adults and are not related to you. The witnesses and the person signing the Will must be in the same room together when they sign. It is best for the signing to be supervised by an attorney or at least at the attorney’s office.

- Person signing the Will must have mental capacity to sign. In order for a Will to be valid the person making the Will must have "testamentary capacity." They must be age 18 or older, they must know who their family members are and what property they have to dispose of by their Will. The mental capacity required to sign a Will is fairly low. If there may be a question about mental capacity, it may help to visit a doctor who can document the person’s mental status on the same day as the Will signing. This type of documentation could be helpful if it is later necessary to prove that person had sufficient mental capacity when they signed their Will.

It is always better to have a Will prepared by an estate planning attorney. Using do-it-yourself forms off the internet may seem like the low cost alternative but if it leads to a Will contest, the cost is very high.

The Job of Executor

Wed, 02 Mar 2011 20:10:00 GMT

The Job of Executor

Many people think that the job of being an executor for a friend or family member is more an honor than it is real work. Not true. The job can be very difficult, time-consuming and can strain relations with beneficiaries.

Choose your executor carefully. If you choose an individual, that person should have some business, legal or financial experience. They should be detail-oriented and have time available to spend on the job. If you don't have a friend or family member who meets this description, it may be best to choose a corporate executor, such as a bank or trust company. A corporate executor will charge a fee but will do a careful and professional job and relieve your friends and family members of the responsibility.

Of course every estate is different, and it is the larger and more complex estates where the job can be particularly burdensome. The poem below summarizes in a humorous way some of the problems.

THE EXECUTOR

I had a friend who died and he,
On earth so loved and trusted me,
That ere he quit this earthly shore,
He made me his executor.
He tasked me through my natural life,
To guard the interests of his wife,
To see that everything was done,
Both for his daughter and his son.
I have his money to invest,
And though I try my level best,
To do what wisely, I’m advised,
My judgment oft is criticized.

His widow once so calm and meek,
Comes, hot with rage, three times a week,
And rails at me, because I must,
To keep my oath appear unjust.
His children hate the sight of me,
Although their friend I’ve tried to be,
And every relative declares,
I interfere with his affairs.
Now when I die I’ll never ask,
A friend to carry such a task,
I’ll spare him all such anguish sore,
And leave a hired executor.

---Today and Tomorrow, Edgar A. Guest
(Chicago: Reilly & Lee Company, 1942)

Guidelines for Keeping Financial Records

Tue, 08 Feb 2011 15:31:00 GMT

Guidelines on keeping FINANCIAL Records

Many people have their financial documents scattered all over the house - on the kitchen table, in stacks of old newspapers, the hall closet, the basement, the garage. This type of “organization” makes it difficult, if not impossible, to keep tabs on your finances.

Sorting and filing financial papers is no one’s idea of fun. Fight the urge to procrastinate and make the time to put things in good order. The financial professionals who work with you will be better able to advise you if they have accurate and up-to-date information. When you pass away, your loved ones will have an easier time locating the important documents needed at that time. One large file cabinet may suffice for storage. Some prefer a few storage boxes or stackable units. Whatever you choose, here is what you should keep:

1. Investment statements. Organize by type: IRA statements, 401(k) statements, mutual fund statements. Keep the annual statements and discard the others. For an IRA or 401(k), keep Forms 8606 (reporting nondeductible contributions), Forms 5498 (the "Fair Market Value Information" statements that your IRA custodian sends you each May), and Forms 1099-R (reporting IRA distributions). Keep records of your original investment in a fund or a stock to help determine capital gains or losses later.

2. Bank statements. Keep the last three years of bank statements. Under certain circumstances (lawsuit, divorce, past debts) you may need more than three years worth.

3. Credit card statements. Keep statements showing tax-related purchases for up to seven years.

4. Mortgage documents, mortgage statements and HELOC statements. Keep mortgage statements for as long as you own the property plus seven years. For other mortgage documents, keep them for the ownership period plus ten years.

5. Annual Social Security benefits statement. Keep the most recent one. It shows your lifetime earnings record. If you see an error, you will need your W-2 or tax return for the particular year to help Social Security correct it.

6. Federal and state tax returns. Keep three years of federal (and state) tax returns and supporting documentation, and keep them as long as seven years to be really safe. Keep tax records pertaining to real property as long as you own the asset (and for at least seven years after you sell, exchange or liquidate it).

7. Payroll statements. If you own a business or are self-employed, keep your payroll statements for seven years or longer.

8. Employee benefits statements. Keep at least the most recent year-end statement.

9. Insurance. Life, disability, health, auto, home ...keep the policies and policy information for the life of the policy plus three years.

10. Medical records and health insurance. Keep these documents for five years after the medical treatment. If you deduct medical expenses on your federal return, keep them for seven years.

Good News in New Law

Tue, 28 Dec 2010 16:11:00 GMT

Finally Congress did something. It extended the Bush era tax cuts for another 2 years. This included raising the estate tax exemption to $5 million per person, or $10 million for a married couple. Other good news: along with the increased estate tax exemption, the tax rate is lowered to 35% and the exemptions are made “portable,” meaning that husband and wife share them even if one does not have enough assets to fully use the exemption. Even more good news: the federal gift tax exemption is raised from a $1 million lifetime exemption to a $5 million lifetime exemption and a 35% rate.

Remember however, that if you live in some states, including Tennessee, you still have a state inheritance tax. Tennessee’s inheritance tax is applied to everything over $1 million owned at death. Furthermore, Tennessee has a gift tax with its own unique set of rules which do not follow the federal rules. Planning will still be required to minimize the Tennessee inheritance tax and to avoid running afoul of TN’s gift tax rules.

For most of us the new law means that we will easily avoid the federal estate tax, but planning will still be necessary to minimize or completely avoid state inheritance taxes. Those with very large estates may want to consider giving more than the $13,000 per person per year in annual gifts, now that $5,000,000 of gifts are exempt from federal gift tax. Only the TN gift tax would be required for TN residents. However, it is always wise to make sure that you have enough for your own needs, particularly your long term care needs, before embarking on a extensive gift-giving program.

And remember: the new law is effective only for the next 2 years. In 2012, we may return to the uncertainty that has become so familiar in the last few years.

Comforting the bereaved

Tue, 03 Aug 2010 20:00:00 GMT

Comforting the bereaved.

The work of the estate planning and probate attorney involves helping people plan for death, disability and loss. It also inevitably involves helping them cope with a loss that has already occurred. In my personal and professional life, I want to offer comforting words to the recently bereaved, whether they are friends, family or clients. Our culture is not comfortable with open expressions of grief, and we all struggle with how best to comfort those who are grieving the loss of someone close.

I just read a very good blog posting on this topic that included some good practical suggestions. Rather than trying to summarize it, I direct you to Brian French’s posting at http://www.estatesettlement.com//ftf_grief_howtohelp.php

Probate avoidance: Is it necessary in Tennessee?

Thu, 29 Jul 2010 22:49:00 GMT

Probate avoidance- Is it necessary in Tennessee?

In some states, probate is expensive and burdensome. In my experience, that is not true in middle Tennessee. In those state with lengthy and expensive probate processes, attorneys often advocate using revocable trusts to avoid probate. This requires having a revocable trust document prepared and then transferring all of your assets into the trust during life. This is usually more expensive and time consuming that having a Will prepared.

The reasons you may want to avoid probate by using a revocable trust are the following:

- Privacy. A Will that is filed in Probate Court, becomes a matter of public record. Any member of the public could go to Probate Court and ask to see it. A revocable trust is not filed in Probate Court and is not likely to become part of the public record unless a law suit develops regarding the document.

- Disability planning. Creating and funding a revocable trust is one way to plan for disability. You can transfer all your assets to a revocable trust, designate a successor trustee and direct how you want the trust assets to be used for your benefit in the event that you become disabled.

- Professional asset management. If you lack the knowledge or interest in managing your investment assets yourself, you may want to transfer everything to a revocable trust and name a professional asset manager to manage your investments or real property and make distributions for your benefit.

- Real property outside your home state. If you own a vacation home in another state, you may want to transfer the vacation home to a revocable trust to avoid the necessity of having 2 probate proceedings- one in your home state and one in the state where the vacation home is located.

The cost of probate is different in different states. In some states, executor fees and attorney fees are a percentage of the value of the estate by law. This is not true in Tennessee. Typically attorney fees are charged according to the attorney’s hourly rate and the amount of time worked, not according to the value of the estate. Executor fees may depend on the language of the document or an agreement that can be reached between the executor and the beneficiaries. In some counties, the Probate Court judge must approve the executor and attorney fees.

Probate Court fees in Tennessee are nominal (around $300) for an estate that goes through probate smoothly. If the estate becomes embroiled in litigation, attorney fees and court fees can be substantial and the time it takes to resolve the dispute and distribute all the property will be substantially more than in a smooth estate administration.

Revocable trusts and the avoidance of probate makes sense in some situations but not all. Make sure it makes sense for your situation before choosing that option.

Estate planning for parents with young children

Mon, 26 Jul 2010 19:08:00 GMT

Estate planning for parents of minor children

Estate planning is not just for the wealthy, and it is not just for the elderly. Parents of young children need to plan for the care of their children if both parents should pass away while the children are still minors.

1- Planning for the financial care of your minor children.

Without a Will: If a parent dies without a Will, state law provides for a portion of the parent’s property to pass to their surviving children at the parent’s death. If property is inherited outright by minor children, a judge would appoint a responsible person, the Guardian of the estate, to care for the inherited property. A court-supervised guardianship can be expensive and burdensome and requires annual reports to the court of all expenditures. Another downside: the assets in the guardianship become the property of the minor when the child reaches age 18.

With a Will: The parent can set up a trust under their Will and name the trustee to manage the assets and distribute it for the minor’s benefit. They can provide for assets to remain in trust until the child reaches an age where he or she has the maturity to manage it responsibly.

2- Designating who will raise your minor children until they are adults.

Without a Will: A Judge will appoint a Guardian of the person to raise the children. The Judge will appoint someone the Judge decides is appropriate.

With a Will: Parents can nominate the person they would trust to raise their children by naming “Guardians of the person” in their Wills. Their choice must be approved by a Judge, but the parent’s choice carries great weight. This is the person who will raise the children if both parents pass away while the children are minors.

3- Designating who will care for your children if you are living but unavailable.

Without this designation: There can be uncertainty, delay and possible involvement of governmental authorities concerning who can make decisions for your child’s care in your absence.

With this designation: A document called a “durable power of attorney for care of a minor child” is a written designation of authority to a responsible adult who you have chosen to provide temporary care for your minor children while you are out of town or unavailable for other reasons. This document could be needed when your minor children require medical care when you are unavailable.

If you are the parent of a minor child, don’t delay in having this important work done.

Advance Health Care Directives

Sun, 27 Jun 2010 18:00:00 GMT

Advance Health Care Directives

As part of an estate planning package, most attorneys prepare advance health care directives or Living Wills along with a Last Will and Testament or Revocable Trust. An advance directive is a document in which you give directions for your health care at some time in the future when you may be unable to make health care decisions or speak for yourself.

In Tennessee, the two most commonly used advance health care directives are the Living Will and the Advance Care Plan. Both documents are valid under state law. The Tennessee Living Will was developed in 1985. The Tennessee Advance Care Plan was developed in 2004. The Advance Care Plan can be found on the Tennessee Health Department website at http://health.state.tn.us/AdvanceDirectives/Advance_Care_Plan.pdf.

There are differences between the two documents. The Living Will addresses the circumstance where the signer, called the “declarant,” is terminally ill, with no hope of recovery, and is unable to speak for themselves. In the Living Will, the declarant expresses his or her wishes about whether artificially-provided food and fluids (such as a feeding tube and intravenous fluids) can be withheld or withdrawn if the person is in a terminal condition.

In contrast, the Advance Care Plan gives the declarant a way to state their wishes about a wider range of possible physical conditions and a wider array of possible treatments. In the Advance Care Plan, the declarant can indicate their wishes regarding cardio-pulmonary resuscitation, maintenance on life support such as ventilators, or treatment for new conditions, as well as the administration of artificially provided food and fluids. The declarant can indicate if there are other conditions (including being permanently unconscious, permanently confused or permanently dependent in all activities of daily living) that they may find to be unacceptable.

Whether you choose to sign the Living Will or the Advance Care Plan, think it through carefully and once you have signed it, talk to your family and friends , especially those who will be making the health care decisions for you. Let your doctor know and make a copy of the form for your doctor’s file. You can always revoke the directive if you change your mind later.

It's all in the details: property titles and beneficiary designations

Thu, 20 May 2010 02:54:00 GMT

It’s all in the details – property titles and beneficiary designations.

As part of the estate planning process, I ask clients for a list of their assets and how those assets are titled. The title to assets can determine who gets the property when the owner dies. Property that is owned by two or more people with rights of survivorship or by husband and wife will pass automatically at the death of one owner to the surviving owner. When real property is held by two or more people as tenants in common, each is considered to own a separate share of the property and to be able to dispose of that share in his or her Will.

As an example of why this is important, consider the following. A husband and wife were sure that they owned their home jointly. However, after the husband’s death, it was discovered that the deed to the property stated their names but failed to describe them as husband and wife. As a result, they owned the property as tenants in common without rights of survivorship. This meant that the property did not automatically pass to the wife at the husband’s death. Instead the Will had to be probated to show that the husband’s share of the property passed to the wife under his Will.

Beneficiary designations on life insurance and retirement plans should be checked as part of the estate planning process also. As an example of why, consider the following. A man named his wife as beneficiary of a group life insurance policy that he had through work. His wife died, and he never changed the beneficiary designation on the policy. Decades later, after a second marriage, the husband died, and the family discovered the life insurance policy that still named the first wife as beneficiary. The insurance company decided that the second wife was entitled to take the policy proceeds, much to the dismay of the children from the first marriage.

Property titles and beneficiary designations are an important part of an estate plan. Make sure they are current and coordinated with your planning documents.

Is it good to have joint accounts with rights of survivorship?

Sat, 17 Apr 2010 17:37:00 GMT

Q: Is it good to hold my assets in joint accounts with rights of survivorship?

A: If you want the joint owner to have the property after your death without going through probate, a joint account will accomplish that. However, joint ownership can complicate matters in the estate planning context in ways that you may not have considered.

You can unwittingly undermine an “equal shares” estate plan. If you have planned for your estate to go equally to your children or other beneficiaries under your Will, the jointly owned property or account will have the effect of delivering a share of your estate to the joint owner. This may make the “equal shares” unequal and your other beneficiaries unhappy.
You can unknowingly make a gift that incurs gift tax. For example, if you add a child’s name to a real property deed as a joint owner with rights of survivorship, you have just made a gift to that joint owner. The value of the real property determines the value of the gift. If the value of the gift exceeds $13,000 (the annual gift tax exclusion amount for an individual in 2010), you should file a Tennessee gift tax return and a federal gift tax return. Sometimes gifts are not discovered until after a joint owner passes away. By that time, there may also be penalties and interest owed in addition to the gift tax.
You can unknowingly render your estate planning documents worthless. The property that passes under a Will is the property that is titled in the name of the deceased person alone and that comes to the estate by a beneficiary designation. Planning to minimize estate and inheritance tax often involves the use of trusts created after death with the property passing under the Will. If the deceased person owned all his property jointly with his surviving spouse, the trusts created under the Will cannot be funded and the couple will not get the benefit of the tax planning in the Wills.
Joint ownership may not be what you intend. Sometimes an older person wants to add a child or friend to a bank account so that person can help them pay bills. The best way to do this is by making that person an “authorized signer” on the account and not a joint owner of the account. Often this distinction is not clearly understood or communicated to bank personnel and an account that should have had an authorized signer added, becomes a joint account instead. This can lead to problems later on when the older person dies and a person who was never intended as a beneficiary becomes the owner of the joint account.

Joint accounts can be a convenient way to own property. Just make sure you understand all the consequences of this form of ownership in the estate planning context.

Tips to avoid fights over your estate

Tue, 30 Mar 2010 16:38:00 GMT

The newspapers are full of stories about family fights over an inheritance. Grief and loss can bring out the best and the worst in the survivors. If you want to make sure your family is not torn apart by a fight over your estate, here are a few tips to incorporate into your estate planning:

Hire a lawyer who knows estate planning law. Your neighbor who handles divorces or your cousin who is a corporate lawyer are not good choices. Hire a lawyer whose practice is devoted to preparing Wills and administering estates. You may pay a little more than if you have a friend or relative prepare the Will, but it will be well worth it.
Be smart in choosing the executor and trustee. If hostilities may erupt among your children, do not appoint one of those individuals to be in a position of authority over the estate. Consider hiring a professional corporate fiduciary, a bank or trust company, to serve as executor if you think a family feud may break out after your death.
Tell your family what you are planning. No one likes to be surprised at the terms of a Will. Sit everyone down for a family conference and let them know what you have planned and why. It can defuse a potential fight if you make clear upfront what your wishes are. This will keep family members from having expectations that will be disappointed and keep them from claiming later that a certain disposition was not what you intended.
If you have moved, make sure your Will takes into account the laws and probate system of your state of residence. Make sure your Will is up to date and not a relic from the past that reflects your life 25 years earlier.

Families should talk about estate planning

Fri, 05 Mar 2010 15:03:00 GMT

Deborah L. Jacobs, author of a new book, Estate Planning Smarts, has an article in the New York Times about the importance of parents talking with their adult children about their estate planning. http://nyti.ms/d4xtNX. These talks can be difficult to start but the benefits are worth it.  The article includes examples of situations where having the talk was critical to avoiding later problems. Jacobs also includes tips on how to get started if either party is uncomfortable with the topic.

Reasons to talk: Parents may improve their plans with suggestions from their children. Children can be more accepting of a plan they may not like if they understand a parent's reasons for certain decisions. The best practice is to have no surprises after a parent passes away.   A child's grief and shock at a parent's loss can be made more difficult when mixed with anger and resentment at an unexpected or unfavorable  testamentary plan.

Even the most harmonious family relationships can dissolve into hostility and conflict after a parent's death.  A discussion about a parent's estate plan, or a series of discussions, can go a long way toward preventing family strife in situations where the children are not all treated equally.   Take the time to talk.

Wake-up Call

Wed, 03 Mar 2010 14:57:00 GMT

Wake–up call

Last week, in the wee hours of Wednesday morning, I rushed my husband to the emergency room with chest pain. It was a heart attack. He was treated promptly and successfully and is now home recovering.

In the emergency room, they asked if he had a power of attorney for health care or Living Will. The unsigned forms were in my computer. I had prepared the documents months ago, but was always too busy with other people’s work to print them out for him to sign. Fortunately, my husband was conscious and able to consent to treatment himself.

The saying “the cobbler’s children have no shoes” comes to mind. In this case, the estate planning attorney has not been following the advice she gives to others. Our Wills and POAs are old and out of date. Preparing new documents for us has just moved to the top of my priority list.

My husband’s medical crisis was like sharp poke in the ribs for me. We never know when those documents will be needed. Get it done now while you can. A medical emergency can happen any time. Be prepared.