Here at Graceful Aging Legal Services, we are passionate about helping parents name legal guardians for their children. It’s a critical step that allows parents to document the people they want and trust to raise their kids if they are incapacitated or unexpectedly pass away.
However, many parents just assume that the person who takes the children into their custody will also manage the children’s inheritance, but that isn’t always the case. In the most simple cases, estate planning for married couples is easy. You leave everything to your spouse, and the other parent will take care of the children.
However, as we all know, family life is rarely simple. What if you are single and there is no other parent to step in? What if your spouse is a “bonus” parent to your child? What if your child’s other parent has lots of love to give them but has trouble with their own finances? What if you and the other parent pass away at the same time? Taking care of your family through estate planning is about hoping for the best, but having a plan in case the worst happens.
What many people don’t realize is that you can’t just “leave money” to minor children. There has to be an adult who holds onto it for them until they turn 18. The person who is named as your child’s custodial guardian and financial guardian can be the same person, but they don’t have to be. If there is another parent involved, they are usually the default custodial guardian but if you are providing the money, you get a say- as long as you do it in advance of your incapacity or death.
If funds are left to a child outside of a trust, the Court will need to be involved in formally appointing a guardian for the child(ren)’s property. The guardian will be required to provide annual accountings to the Court, as well as purchase an insurance policy (known as a court bond) to secure the child’s property. If the parents have nominated a guardian, the Court will usually say a blessing upon that choice as long as it is in the child’s best interest.
In the case of a child who is 18 or older when a parent dies, they are able to receive their inheritance outright. While this might be less complicated than having a guardian appointed, it creates different issues. Think about the things you wanted to spend money on as a young adult? When did you truly become responsible with your money? What value did you place on money given to you versus money that you earned? If you’re concerned about any of that, you should consider raising the age at which your child gets their funds distributed if you do not want to take the risk that your child’s inheritance will be mismanaged, lost, or squandered on things like fast cars, clothes, and lavish trips.
Utilizing a living trust is the best way to put “speed bumps” and “checks and balances” around your children’s inheritance so that they do not receive a lump sum of money outright before they are mature enough to handle it. Again, you will be able to raise the age or lay out key milestones in which the child(ren) receive their money and specify a trustee who will again oversee the distribution of funds for your child(ren) according to your wishes for their future and how their inheritance is to be spent (i.e. on a college education, first house, wedding). While guardianships are overseen by the Court, trusts are handled within the family.
Luckily, all of this is easy to do if you work with a local qualified guardianship or create an estate plan attorney. In our office, we have a system that walks parents step-by-step through the decision-making process so that they are able to choose the best people to serve as their child’s property manager and/or legal guardian.
Our Nashville law firm is here to serve you. Schedule an appointment to talk with us so you can begin the process of legally documenting who will serve in these two very important roles in your children’s lives if the unthinkable happens.
Trusts are an excellent tool for estate planning and asset protection purposes. The most common type of trust is a Revocable Living Trust, which holds your assets and helps avoid the probate process when you pass away. However, Revocable Living Trusts do not help much when it comes to asset protection planning.
What Can I Do with a Revocable Living Trust? A Revocable Living Trust is an essential tool for avoiding probate. If you own enough assets to qualify for a full probate proceeding when you pass away, then you will most likely benefit from a Revocable Living Trust. Assets placed in the trust, such as a home and financial accounts, can pass to your beneficiaries without going through the probate process. This saves your loved ones time and money and provides a level of privacy for your personal affairs. A successor trustee of your choosing can also manage any finances you place in your Revocable Living Trust if you ever become incapacitated, or even if you just do not care to handle your own financial affairs anymore.
Will a Revocable Living Trust Protect My Assets? Revocable Living Trusts do not protect assets from financial predators. If you owe money to creditors, then those creditors may take assets from your trust, even though the trust is technically the legal owner of the assets. Your Revocable Living Trust is not suitable for asset protection purposes because you are still considered the owner of the assets if you are the trustee because you have complete control over the trust. There are no restrictions on how you can spend the assets in the Revocable Living Trust, and you can revoke the trust at any time. Revoking the trust means the assets will revert to your direct ownership, putting them back under your control. In addition, all assets in the Revocable Living Trust are reported to the IRS for tax purposes under your Social Security number, meaning there is even less separation between you as an individual and the Revocable Living Trust. This is different from Irrevocable Trusts, which have their own tax identification numbers.
If you are interested in learning more about how certain Irrevocable Trusts can be used for asset protection purposes, or if you’d like to learn more about estate planning with a Revocable Living Trust, simply set up a consultation with a our Nashville trust attorney to talk about how we can help.
Have you ever wondered what is the worst that can happen if you become incapacitated or pass away without an estate plan in place?
If you have, you’re not alone. This is actually a common question that I receive as a Middle Tennessee estate lawyer, especially from those in close-knit families who believe that their kids (or other loved ones) will peacefully sort everything out when they pass away without needing any additional legal documents or guardrails in place.
Failing to Plan Makes Life Harder for The People You Love
The truth of the matter is that without a plan (or even the wrong plan) you make things much harder for the people you care about, even if everything goes as smoothly as possible and everyone gets along. Managing your affairs will also become much more costly and more time-consuming than they need to be if something happens.
You May Not Like The “Default Plan” The State of Tennessee Already Has for You
Remember, you are not obligated to create an estate plan; the state of Tennessee already has a plan that your loved ones will be forced to follow in the event you do nothing. The only way to override the state’s plan is to legally create one of your own.
What If You Are Incapacitated?
If a crisis happens during your lifetime and you don’t have a plan, you run the risk of losing flexibility and you may even lose control. Even if your loved ones want to help if you become incapacitated, they could be barred from getting involved with your affairs because of HIPAA laws or other privacy policies. If that happens, all decisions about your care and your future will be made by people who don’t know you or what is important to you.
Make Planning a Priority to Protect Your Family, Your Wishes, and Your Assets
The bottom line is that an estate plan is a roadmap that’s designed to make life as easy and hassle-free as possible for yourself and your loved ones in the event of illness, incapacity, or death. It’s one of the most loving gifts you can give. If this article has caused you to rethink your current plan for your affairs, we are here to help you. Simply contact our Middle Tennessee law office at (615) 846–6201 to schedule a consultation.
Knowing a few common terms can go a long way in understanding estate planning. For example, if you’re unsure what a trustee and an executor are, you won’t know who to choose for each (very important) role.
Let’s dive into some estate planning basics!
Common Estate Planning Terms
Planning for your estate after death helps secure the future of your assets and helps you figure out what you want and how to accomplish it. Creating an estate plan gives you peace of mind that your wishes will be respected upon your passing – even if your loved ones may be unhappy about it.
An estate plan can also reduce tax obligations for your family and prevent or minimize family conflicts. A will is a significant part of the estate planning process. Wills outline how you want your assets to be distributed, who should take care of any dependents, and who will carry out your wishes.
When learning about estate planning, there are some terms you’ll need to know, including:
Probate – the court process that validates wills and administers the estate
Executor/Executrix – the person named in a will to manage estate assets
Trust – a legal tool used for managing assets, often in order to avoid probate
Trustee – the person named in a trust to manage trust assets
Personal Representative – the person who administers an estate (this is the umbrella term used in Tennessee for executors, etc.)
Guardian – a person who is named to oversee the needs of a minor child
Beneficiary – someone who is specifically named to inherit
Heir – someone who inherits based on their family relationship
Understanding these terms will help you make decisions that protect your legacy.
Creating a Will and Trust
Creating an estate plan can involve the use of wills and trusts.
A will outlines how you want your assets to be distributed after death, who should take care of your children, and who will handle the administration of your estate. However, the purpose of a will is to go to probate. When drafting a will it’s crucial to consider factors such as family dynamics, non-probate assets, and the potential for disputes.
On the other hand, trusts provide added benefits like privacy and flexibility. When well-funded, it bypasses the need for probate proceedings. Even without lots of funding, trusts enable you to better control how your assets are managed during your lifetime and after you pass away.
Whether you choose to have a will or trust is a personal decision, but setting up a trust can offer advantages such as increased control over asset distribution, continuity in managing your estate affairs, and potential tax benefits. Sometimes, it’s a good idea to have both!
Appointing Executors and Trustees
If your estate plan involves a will or trust, it is crucial to appoint executors and trustees.
An executor (or personal representative) is responsible for carrying out the terms of the will. For example, an executor must distribute assets and handle obligations during the probate process. It is important to choose someone with integrity, conflict-resolution skills, and financial knowledge. Since you won’t be there to smooth out any disputes that arise, choosing a capable peacemaker is a must.
Trustees, on the other hand, oversee trusts. They ensure that assets are managed according to your instructions for the benefit of beneficiaries. It is advisable to select a trustee with expertise in finance who’s committed to fulfilling your wishes. In other words, pick someone you can trust as your trustee.
Good options for executors or trustees may include attorneys or financial institutions, since they are generally impartial and have specialized knowledge. By ensuring reliable individuals or entities fill these roles, you can safeguard your intentions for properly managing your estate.
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We’re just scratching the surface of what estate planning is. If you’d like to learn more about planning your estate and aging gracefully, sign up for the Graceful Aging Legal Services newsletter. We’ll send you regular updates and insights into estate planning, conservatorship, and more!
When you aren’t clear about your wishes, you leave a blank space for your loved ones to try to fill in. This can be incredibly stressful to them – even if you’ve expressed your wishes to them but didn’t write them down – so it’s important to know your wishes ahead of time. Learn what could happen to you if you don’t make your wishes known.
What Happens if You Become Incapacitated in Tennessee?
If you become incapacitated in Tennessee (a temporary coma, for instance,) and have no medical power of attorney set, your loved ones may have to go to court and then a judge will decide who can make medical decisions for you if you’re unable to communicate your wishes.
Trying to determine your wishes after you can no longer express them can be an extremely stressful time for your family, which is why it’s so important to communicate your wishes ahead of time, just in case anything happens to you.
What Happens if You Die without a Will or Trust in Tennessee?
If you die without a will, that is called “intestate.” This means that whatever inheritance you leave behind, including your property, is subject to Tennessee intestate succession laws. Intestate laws typically leave your property to your surviving spouse and/or children, but parents, siblings, nieces, and nephews could become eligible too.
Here’s a quick breakdown of what would happen in Tennessee if you are married or have children:
If you have a spouse but no children, the spouse would inherit your entire estate, even if you’re separated.
If you have a spouse and children, the estate would be divided equally among all parties (except that the spouse can receive no less than 33% of the overall estate).
If you only have children, your estate would be split equally among all the children.
Keep in mind that only your biological and adopted children will inherit from you if you do not have a will. If you would like to leave part of your estate to step-children, foster children, godchildren, or other children who are close to your heart, you’ll want to make plans for that in your will or through non-probate beneficiary designations.
Here’s what would happen if you died unmarried and without children:
If you have a parent, the entire estate would go to your parent(s).
If you have sibling(s) but no living parents, the estate will be split equally among your siblings.
If you have no parents or siblings, the estate will be split equally among your siblings’ children.
If you’ve none of the above, the estate would be split equally among paternal and maternal aunts and uncles.
You don’t have to die to see how this one might end if you don’t write your decisions out!
Who Makes Funeral Decisions if You Die in Tennessee?
Similar to the above, if no one has been legally designated to make funeral decisions on their loved one’s behalf, it falls to the next-of-kin, which would be the spouse or adult children. Once the family member takes responsibility for making and paying for their loved one’s funeral arrangements, they sign a legal contract that obligates the funeral home to follow instructions from that family member alone.
Make sure you tell your family what you want so there’s a consensus during a difficult time..
What if there are no next of kin?
If there are no next of kin (as defined above) and no personal representative, any other person willing to assume responsibility and arrange the funeral (including the funeral director) can make funeral decisions, after attesting that a good faith effort has been made. As for your estate, if no family can be found it will ultimately be turned over to unclaimed property.
Learn More from Graceful Aging Legal Services
Don’t leave a blank space for your family members to fill in regarding your end of life wishes. Don’t keep them second-guessing. Instead, leave something that people can read like a magazine to know what you want your life – and death – to be like. Want more tips like this one? Sign up for our newsletter!
