When a home is passed on to adult children after the death of a parent, there are three typical paths that beneficiaries can choose: move into the house, sell the house, or rent it out. If you and/or your siblings recently inherited a house and are uncertain about the best way to deal with the asset, a Nashville estate planning attorney can help you work through the following considerations relating to the property:
Option One: Move into the House
If you decide to move into the house, you may have to anticipate an increase in property taxes as the current market value of the house will be reassessed
You may want to conduct a home inspection to check if there are maintenance and safety issues that must be addressed immediately. You can also calculate the cost of renovation and repairs. The good news is that if you grew up in the home or talked with your parent(s) on a regular basis, then you probably already know of any maintenance “quirks” that your parent(s) dealt with when deciding whether you want to take them on as your own.
There can be complications if you have siblings who are also co-owners. If you want to live in the home yourself, the other siblings will need to be compensated. You may do this through rental payments, buying out their share by mortgaging or refinancing the property, or by making the house part of your share of a larger total estate.
Financial and legal obligations of keeping the house
By moving into an inherited home, you are therefore accountable for the property maintenance and all its corresponding taxes and insurance payments. You are also responsible for any legal obligations arising from homeownership. Make sure these are responsibilities that you are prepared for.
Option 2: Selling the House
Unsettled financial obligations can make selling the inherited house a bit problematic. You need to pay all the remaining debts out of the total sales of the property. And it gets more complicated in instances when the money owed on mortgages, taxes, judgments, and/or liens is higher than the price of the property itself.
If the house you have inherited hasn’t been updated in a long time, major cleaning and minor renovations can potentially work to your advantage. On the flip side, renovations, in general, will cut into the profit you are expecting. Make sure you are focusing on changes that will give you the biggest bang for your buck.
You only have to pay capital gains tax on any appreciation in the home’s market value from the time you inherit it up to the time you sell it.
You also would need to consider the commission of the real estate agent should you need one.
Financial and legal obligations of selling the house
You may have to deal with a lot of challenges to get the house in a saleable condition, but once you sell the property, you are free from the responsibility of paying for its maintenance, taxes, insurance, and any other legal matters related to homeownership.
Option 3: Renting the House
You can generate a passive income through rental payments for the house. The demand and rate will depend on the location and condition of the property.
It pays to check on any relevant city ordinances or homeowner’s association rules on renting.
You could consider hiring a professional property manager to handle the marketing, leasing, and managing of the house if you want to minimize hassles and costly problems.
You have to provide precautionary measures and repairs for any damages found in the house you are offering for rent. Being a landlord entails a lot of liability.
If you consider making the property a bed and breakfast or vacation rental, know that management and maintenance costs can go way up in this scenario. And, you also have to perform duties similar to a Hotel Manager should you really push through with this idea.
Financial and legal responsibilities of renting out the home
You are legally and financially responsible for the house as the homeowner. Furthermore, you now have the responsibilities of being a landlord and you should seriously consider the additional accountability of renting out the home.
Inheriting a house can either be a blessing or a burden depending on the way you will handle it. If you are still undecided, it is wise to weigh your options thoroughly by discussing it with an experienced attorney who can give you a balanced perspective on the matter. We encourage you to schedule an appointment today with our Nashville estate planning and probate attorney, April, at (615) 846–6201 so you can best understand how the inheritance will affect you or your family.
When was the last time you took a look at your Last Will and Testament? If it was five years ago or more, then you should consider dusting it off and reading through to make sure it’s up to date.
Remember, a lot can change in five years: the birth of new family members, marriages and divorces, or even significant changes in your finances are just some of the reasons you should revisit your Last Will and Testament, as well as the rest of your estate planning documents like your Power of Attorney and Advance Directive. If you notice your Last Will and Testament is out of date and you intend to revoke it, you should have a replacement ready to go.
If you want to revoke your Last Will and Testament due to changes in your family’s situation, you should speak with an experienced Davidson County Will lawyer. A Will lawyer can help you figure out the best way to change your estate plan, which will probably involve rewriting your Will, Power of Attorney, and healthcare documents.
Taking a look at your Last Will and Testament, as well as your other estate planning documents, at least every five years is a good habit to ensure your wishes are known to your family and you have the proper planning in place. If you believe you may have a problem with certain family members once you’ve changed your estate plan, you may want to seek the advice of an experienced Davidson County Will Lawyer to talk about your options.
If you would like to learn more about revoking your existing Last Will and Testament, or if you’d like to review your existing estate plan, please schedule an initial call with April Jackson.
More than half of Americans now have at least one chronic health condition, mental health concern, or substance abuse issue. That is a staggering statistic that our Middle Tennessee estate planning lawyer who works with sick and disabled clients confronts every day.
There are varying definitions of what it means to be “chronically ill.” One definition is having a disease that a person will live with for many years. These types of illnesses include diabetes, cardiovascular disease, lupus, multiple sclerosis, hepatitis c, and asthma. Alternatively, some define chronic illness as an inability to perform at least two activities of daily living such as eating, toileting, transferring, bathing, and dressing. Or, the patient may require constant supervision by someone else for health or safety issues.
Regardless of how “chronic illness” is defined, every adult living with a long-term diagnosis should have a few basic legal documents in place to ensure that their wishes are honored and that they are legally and financially positioned to receive the best care possible in the least restrictive environment as possible.
For example, an experienced Middle Tennessee estate planning lawyer can help create legal documents such as Powers of Attorney or Healthcare Directives that appoint someone you trust to pay your bills, access bank accounts, and make medical decisions for you if you are incapacitated or otherwise unable.
Additionally, a Middle Tennessee estate planning lawyer can help you utilize tools such as trusts to protect hard-earned assets from nursing homes, creditors, or predators. A living trust also offers control, as you can set rules and parameters as to how your assets are to be used and managed by a trustee who is overseeing your affairs. A trust can also help pass down your assets outside of probate, which can be a long and expensive process that most Tennessee residents would prefer to avoid.
The bottom line is this: Do not assume that because you are suffering from a chronic illness that it is too late to take steps to better your financial situation or safeguard your family. Even if you (or a loved one) are currently in a nursing home, there may still be options! The first step is to simply contact our office. We will schedule a planning session with you and walk through all of the avenues of protection that could work best for your family.
The IRS recently announced the 2021 federal estate tax rate limits, which are $11.7 million for individuals and $23.4 million for married couples. This is increased from $11.58 million and $23.16 million respectively in 2020.
Under this new guidance, wealthy Americans will be able to leave up to $23.4 million to their heirs without being subject to federal estate tax rates, which top out at 40%. The federal gift tax exemption will remain at $15,000 annually, meaning gifts made up to that amount will not be taxed by the federal government.
Will There Be Changes Under the Biden Administration?
While estate tax rates have stayed fairly consistent over the past few years, estate planning attorneys across the country are being asked by their clients how the presidential election may affect future federal tax limits.
During the campaign season, the Biden/Harris team proposed reducing the estate tax exemption to $3.5 million for estates and $1 million for gifts. The ability to pass such measures, however, appears to be a long shot, considering the current makeup of the Senate. The Democratic party now holds a very slim majority and lowering the estate tax threshold is not particularly popular on the Republican side. It would be difficult, if not impossible, at this point to get a majority of Senators to agree to such legislation.
Complicating matters further is the coronavirus pandemic. It’s anticipated that Congress will spend the next few months working on financial relief packages for individuals and businesses impacted by COVID-19. As such, major overhauls to the estate tax are anticipated to take a backseat in 20201 in favor of more pressing matters.
However, when it comes to the whims of Congress, estate planning lawyers “never say never.” That’s why we are continuing to keep a watchful eye on Congress should support begin to emerge for estate tax reform in 2021 and beyond. For real-time updates, be sure to follow our estate planning blog, or subscribe to our newsletter. Finally, if you have specific questions about the federal estate tax or how to avoid “death taxes” on your estate when you are gone, please contact us at (615) 846–6201 to schedule an appointment.
Estate planning offers legal protection for families and individuals through all of life’s transitions. Wills, trusts, powers of attorney, and healthcare directives are the most common estate planning tools we use to help clients protect their wishes, safeguard their assets, and ensure provision and care for their loved ones following their death or incapacity.
What Does My Estate Plan Have to Do with My Divorce?
Your estate plan can be impacted greatly if it’s not updated after a divorce. For example, if your ex-spouse has been named as a beneficiary on your life insurance policy, they may still be able to collect the proceeds if you suddenly pass away without updating your documents. Your ex-spouse may also retain authority roles as your power of attorney or healthcare agent unless you revoke such power. As a single adult, you must also name the people you now want to act on your behalf or manage your affairs in an emergency once the role is no longer filled by your ex-spouse.
Won’t a Divorce Automatically Stop My Ex-Spouse from Having Such Power?
While this topic has been introduced in the Tennessee General Assembly, no laws have been passed yet to prevent it. Although a divorce decree will remove your ex-spouse from inheriting under your will or serving as Personal Representative/Executor, it does not remove them from serving under other documents like your power of attorney or healthcare directive. And it doesn’t remove them from inheriting anything they receive as a beneficiary outside of probate such as life insurance, bank accounts, retirement accounts, or trust funds. That is why you must update your documents after a divorce to be certain that your ex no longer has this power.
What Documents Should I Update?
During your divorce, the law prevents you from making many changes to your financial situation or medical insurance. Once the decree is signed though, you will want to review and update the following documents:
Will
Trust
Power of Attorney
Healthcare Directive
Beneficiary Designations on Life Insurance Policies
Beneficiary Designations on Retirement Plans
Beneficiaries on any accounts with Payable on Death Provisions
Getting Help
Tennessee has laws that dictate when documents can be updated or altered as you move through the divorce proceedings. It’s important to speak with an experienced Davidson County will and trust lawyer before you make any changes, as any unapproved transfers or changes to your documents could be considered fraudulent. If you need help getting started, we are here to assist you with your planning. Contact our office by calling (615) 846–6201 or click here to schedule an appointment.
Do you remember the story of Terri Schiavo? While her situation was unfortunate, it sparked a conversation among families around the country. What would you want in a medical emergency? And who do you want to make decisions for you?
What is an Advance Directive?
An Advanced Directive allows you to make medical decisions in advance of an emergency and name an agent to carry them out. It is also called a Living Will. An Advance Directive lets you tell your family and medical providers what is important for your quality of life. It’s important to let your loved ones know if you would want to continue medical treatments or not in the event that your quality of life decreases significantly. Your doctors will ask about your Advance Directive if you are unable to make decisions or communicate for yourself.
A living will is also known as an advance directive for healthcare.
If you have to go to the hospital for any reason you have probably been asked if you have an Advance Directive or Living Will. While it’s important to have your wishes in writing, it’s even more important to educate and prepare your loved ones in case they ever need to make difficult decisions about your care. Talking about your wishes with your family can assure them that they are doing the right thing for you in difficult times.
While it can be difficult to have this conversation, it is incredibly important that your family knows how you would want to be treated in an emergency situation. So please check out The Conversation Project and reach out to your loved ones to begin this conversation.
I hope you’re staying healthy and if you have any questions regarding this topic please schedule a complimentary call with us here!
