As a parent, you want your child to lead a happy and fulfilling life and have healthy marriages of their own. However, it is hard to ignore the possibility of divorce. No matter how much you may love your child’s spouse, your interest is always in protecting your child. So when estate planning, how can you ensure that your child’s inheritance will not be split with their spouse in a divorce?
Division of property in a divorce will depend upon whether the property is considered “separate property” or “marital property”.
What is the difference between separate and marital property? Separate property is the property that belonged to an individual before marriage. This can include monetary assets, cars, real estate, and sometimes even pets. Marital property, on the other hand, is the property that was acquired or shared during the marriage. So what happens if your child puts their inheritance into a joint bank account? To answer this, we need to discuss how Tennessee law views inheritance.
How does Tennessee view “inherited” property in a divorce?
In Tennessee, inherited money or property is generally considered to be separate property. This means that whether your child inherits before or during their marriage, the court will treat the inheritance as exclusively belonging to your child. They are not obligated to share it with their spouse. However, have you ever heard a long-married couple say “what’s mine is yours, what’s yours is mine?” Many couples treat property this way, which can work well unless the couple decides to separate. This brings me to a very important point:
If your child puts an inheritance into a joint banking account shared with their spouse, it would become marital property subject to division at divorce.
How can you ensure that your child’s inheritance will be divorce-proof, no matter how your child handles the inheritance?
One way to ensure the safety of your child’s inheritance is to set up a Family Trust. In general, a family trust is an estate planning tool that protects your family and your assets. A family trust is a three-party relationship between you (the Grantor), your child (the Beneficiary), and the person in charge of maintaining and distributing the assets in the trust (the Trustee). Through a Family Trust, you will be able to determine how and when your assets will be distributed by the Trustee to your Beneficiaries after your death.
In the divorce context, a Family Trust is a great option because the property is held by the Trustee. This means that on paper, the property from the Trustee will not technically belong to your child. So in the event of a divorce, a court will not consider the assets from the trust for division. Family Trusts are generally flexible and easy to set up, and they are even cost-effective. Of course, if a Family Trust is not right for you, your estate planning attorney will be able to provide alternate options to achieve the same goal!
Do you need a family trust to protect your children’s inheritance?
Of course, nobody wants to believe that their child’s marriage will end in divorce. However, estate planning is all about considering life’s “what if” questions. In the end, setting up a trust for your family will allow you and your child the confidence that their inheritance is safe.
To learn more about trusts and other estate planning tools that Elder Law Attorneys in Tennessee use, follow us on Facebook or Instagram!
When one spouse wants to disinherit the other, but they are still married, it can be a complicated process. In most cases, disinheriting a spouse is only possible if you have a valid prenuptial agreement or if you are divorced.
Let’s illustrate this with an example:
Jack and Jill have been married for five years, and have one child together. Their house was purchased by Jill before they were married, and Jack’s name was never added to the deed.
Jill recently discovered that Jack is cheating on her with the Instacart shopper. She and Jack are now separated and have started the divorce process, but she wants to make sure that if she dies before the divorce is final that Jack won’t get anything from her.
What can Jill do?
Jill can disinherit her spouse after the divorce
Unfortunately, Jill cannot disinherit Jack until she files for divorce. Tennessee law does not allow you to disinherit your spouse- even if you write a will that says that! My advice is to get divorced as quickly as possible. Unless divorced, Jack is entitled to his share.
The good news is that once divorce papers have been filed, there will be an automatic injunction that specifies that the pair no longer have spousal rights on the property through marriage. This is primarily to protect things like bank accounts, real estate, relationships with the children, and health insurance coverage. However, all that does is prevent money from being spent by either spouse outside of regular expenses. Jill won’t be able to do anything, like estate planning, until after the divorce has been settled or through special permission from a judge.
In the meantime, there are still a few steps Jill can take:
Utilize her prenuptial agreement
Jack and Jill signed a prenuptial agreement prior to their marriage. In it, they waived the right to inherit from each other. All Jill needs to do now is to rewrite her will to specifically omit Jack.
Divide assets into separate trusts
Jill can establish a trust under her name and place the house in it. Since Jack’s name isn’t on the deed or on the trust, he has no right to the house if Jill were to pass before the divorce is finalized.
Rewrite her will
Jill can rewrite her will so that Jack only gets what he is entitled to by law, called his elective share. In Tennessee, spouses are entitled to a homestead allowance, a year of support, and elective share. The elective share amount depends on how long you are married.
Hire a family law attorney
The divorce will go much quicker with the help of a family law attorney.
Jill can get a jump start on planning her estate.
Finally, if Jill is preparing for a divorce, she can take advantage of all the legal documents at her fingertips and get a head start on creating the estate plan she desires. Once her divorce decree is finalized, she can meet with her lawyer and sign the document to make it valid.
Are you getting a divorce and want to start over with your own will and estate plan in Tennessee? Are you looking for a referral to a family law attorney? Let us know! We are happy to help you make plans for your new life. Not sure where to start? Give us a call. We offer a complimentary 15-minute call to see if we are the right fit for you and your situation. You can schedule your call by clicking here.
Every family is different and has different needs. The family unit can be as simple as a married couple or as complex as a blended family with committed partners. Regardless of who makes up your family, you need to ensure that you have adequate legal protection for your partner and any children. This week we will discuss why legal documents like wills, trusts, and powers of attorney are appropriate for unmarried couples and why these documents are important to make sure your family comes first.
How do you plan to care for your life partner in Tennessee?
*One caveat before we discuss what you can do, let me say what you cannot do. You cannot disinherit your spouse. So if you are in a new relationship but still legally married to someone else, your options will be limited. To read more about this topic, click here.
Tennessee does not recognize common law marriage
Many people believe that even without a marriage certificate, couples who live together for a certain number of years and hold themselves out as spouses to the community become “common law married.” Only about ten U.S. states allow common law marriage, and if you meet the requirements for common law marriage in one of those states before moving to Tennessee then you may qualify to inherit from your partner as a spouse, but it would be an uphill battle if anyone challenged your right to inherit as a spouse. The better (and less expensive) option is to create an estate plan.
Siri: Contact a qualified estate planning attorney near me
Make it as official as you can
While there are some rights and privileges that you cannot achieve without the formality of marriage, we can re-create many spousal rights through an estate plan. An estate plan requires evaluating your family situation, your assets, and your wishes to develop legally binding documents that will meet your goals for decision-making during your lifetime and asset transfer upon death.
Most people don’t like to think about their own death or their partner’s, but this is essential to having a solid plan in place. Estate planning is a big part of my Nashville law practice, and here is what I recommend for families choosing to forgo the traditional contract of marriage:
Create appropriate Powers of Attorney in Tennessee
If you are in a committed relationship and trust your partner to make decisions for you, you should both create the appropriate powers of attorney. A Power of Attorney will allow your partner to have decision-making authority in an emergency situation if you are unable to do so. This can include medical and financial powers of attorney. Depending on your personal comfort level, your partner may also be authorized to act on your behalf and at your direction even if there is not an emergency, for example, if you were out of town for something that had to be done in person like a real estate closing.
Create a Will
When you die, your family of origin may feel entitled to an inheritance in favor of your life partner. Without a Will, Tennessee law is on their side. In order to protect the family you have created with your partner, you will need a properly executed Will. A Trust may also be appropriate depending on your situation.
Consider what will be important to your family of origin when you are gone. Will they be upset if you pass family heirlooms to your partner or children who are not legally related to them by blood? Are there significant assets that they expect will “stay in the family?” If so, and assuming it is safe to do so, I encourage you to discuss your wishes with your family of origin and see what provisions can be made for them. It is often easier for your loved ones to accept your wishes if they heard them directly from you, rather than reading them on paper when you are gone.
In order to make sure that your companion receives any inheritance that you would like them to have, you will need to have a Will and make them a beneficiary of whatever share you would like them to receive. I encourage you to speak to your loved one about your resources and how they would be passed in three scenarios- (1) if you die first, (2) if they die first, (3) if you die together in a common accident. Particularly if you have kept your finances separate, think about how you would gain access to each other’s accounts, how long it would take, and how the family would support itself in the meantime.
POD accounts are an excellent way to pass on assets to your unmarried partner.
Add Beneficiary Designations to your accounts
Many types of accounts allow you to add beneficiary designations to them. The most familiar type is life insurance, but there are many others. If you have retirement accounts like IRAs and/or 401k accounts, look at adding your partner as the beneficiary to those funds when you pass. The same can be done with brokerage accounts and bank deposit accounts.
Rather than going through your “estate” as laid out in a Will, the financial institutions holding money for you will essentially cut a check to your beneficiary when they learn that you have died.
And finally….
Think about who depends on you?
You need to consider what might happen to your partner when you pass away. Similarly, how would you care for the family if they were to die or become disabled? How can you ensure that any serious long-term disruption to your family life is a bump in the road (at least financially speaking) and not a train going off the rails?
Whether you make significant earnings at your career or you make valuable contributions within the home or both, your family would be lost without you. That’s why it’s important to have a plan in place. If you are a Tennessee resident committed to helping your family, whether married or not, schedule a call with us to talk about how you can protect your family when they need it the most.
This week we are going to talk about why you need a medical power of attorney, even if your spouse is available to make decisions for you.
In a medical emergency, there is an assumption that your spouse would be the health care agent, make health care decisions, and deal with the hospital and doctors on your behalf. However, what happens when a spouse is separated, no longer wants to be in contact, or doesn’t agree with your health care values?
If this happened to you, would you still want them to make decisions for you? Do you want your adult children to make medical decisions for you? What if your spouse and children disagree on what type of treatment(s) you should receive? When faced with an emergency, please consider having your medical Power of Attorney already in place.
What happens if you don’t have a Medical Power of Attorney?
There are many situations that can arise when you become incapacitated or have a healthcare emergency. Even if it seems unlikely that your spouse would be disinterested in your health, it’s important to remember that your spouse may have trouble thinking clearly in an emergency or may also be seeking medical care. A medical Power of Attorney with an agent that is capable of making medical decisions, even in an emergency, can lower the risk and confusion regarding your medical decisions.
What is a Medical Power of Attorney and why you need one.
A medical Power of Attorney, also known as a Durable Power of Attorney for Healthcare, is a document that allows you to appoint someone as an “agent” to make decisions about your health care. This agent will make decisions on your behalf if you become too ill or incapacitated. A medical Power of Attorney ensures that your wishes will be followed. We have an experienced estate planning and probate attorney here in Nashville who can help you customize these decisions and record how choices will be made.
Choose someone you trust to make medical decisions for you.
How to choose the best Agent for your situation
When you are choosing your medical agent for your Medical Power of Attorney, it is important that you choose someone you can trust to adhere to your preferences regarding your medical care. Discuss your wishes with your agent before they need to make any care decisions. Make sure that you have confidence that your Agent will make the right decisions about things you two have not discussed.
Don’t wait to create your medical POA.
Conclusion: Why everyone needs a Medical Power of Attorney
It is important to think about what you would want in a medical emergency. Do you want your spouse to always make decisions for you?
Designate ONE person authorized to make decisions for you if you are unable to make or communicate your wishes. Even if you want your spouse to make those decisions, it’s always a good idea to have a “backup” person. This backup person can help out with decision-making in case your spouse is unavailable when someone needs to step in.
Whatever you decide, you should have a Medical Power of Attorney. Write your power of attorney in conjunction with your advanced directive (also known as a living will). All of these documents are an important part of a well-thought-out estate plan.
Do you have a plan for emergencies? Do you want help putting your values on paper? Take our Virtual Estate Planning Challenge! This 7-part Challenge helps you brainstorm the important stuff before creating your estate plan. We had a ton of fun making it and think you’ll really benefit from it too.
Many people think that if they are married, their spouse will automatically inherit everything when they pass and so they don’t need a will. While there are some situations where a spouse does inherit everything, it is not the default under Tennessee law. In Tennessee, if you are married and have children, your spouse will share your probate estate with your children. I call this the S.A.K.S. method (Spouse and Kids Share). In other words, your spouse does not inherit everything automatically.
To clarify:
If you die without a will, Tennessee law dictates that the spouse and children split the estate.
However, I believe that everyone should create their own plan for distributing their assets after death, even if the state has an understandable default on how to do this. Here’s why:
Having a Will can make it easier for your family to go through probate.
Having a Last Will and Testament can be an important way to reduce any burden on your family after your death. In your Will, you decide not only who will inherit your estate but also key decisions like who will serve as Personal Representative (also known as the Executor) and whether you want to require or waive documents that are required by statutes. Having a Will is your chance to have a say in the probate of your estate before you die. The process can be much less complicated for your beneficiaries as well because you may decide to be even more specific about some of the more difficult decisions that need to be made.
It is much easier on your family if you have an estate plan in place. A last will and testament will provide instructions on how to designate and divide assets between family members and friends. If you die intestate (without a will), then the state’s inheritance laws will determine who gets what.
Preparing an estate plan will cover situations that may arise after your passing
Have you considered what might happen if your spouse remarries? Are you aware that a future spouse can take an interest in a portion of your estate? Would you want part of your assets to go to a new spouse or to any children that they may have with that spouse? Do you have family or children that should benefit instead? There are many other factors to consider, but it’s important to discuss these things with your attorney when you create your estate plan.
A Will provides security for your spouse
If you are more concerned about your spouse inheriting from you than your children, you can plan for that too! The general rule in Tennessee is that the spouse would get no less than a third of the estate.
For example, if you are splitting the estate with two or more children, the spouse would get a third. If there is only one child, the spouse would get half.
What if you want to provide more? With a Will, you can designate that your spouse gets everything or only leave certain things to your children. Many spouses write “I love you” wills, where they inherit first from each other, and then their children only inherit when the second parent dies.
Use a Will to protect spousal inheritance from changes in family dynamics
Another consideration in making a Will is your family dynamic. Do you have children from different relationships throughout your life? Do you have concerns about how your children from those relationships will get along with your current spouse when it comes to your estate? It is important to consider how you want inheritances to be split. Your Will can dictate how your assets will be handled! You can also designate your preference for the guardian of any minor children in the event that both you and the other parent die.
Additionally, a Will provides provisions such as the appropriate age at which your children should take over responsibility for managing any inheritance. One primary concern many parents have is whether young adults will be mature enough to make sound judgments concerning any money they inherit. Your Will can establish a certain age at which young adults gain control of their inheritance, to ensure that it isn’t squandered when you would prefer it be used towards education or sound investments.
In short, your Last Will and Testament should be drafted so that your wishes regarding your family are honored.
A Will can safeguard your beneficiaries if they become disabled
Are any of your assets expected to go to a loved one who has a chronic medical condition? If so, you’ll want to consider that an inheritance could disqualify them from any means-tested government benefits that they may receive or be entitled to, which could be devastating if they are counting on that benefit. The most common examples of this are Supplemental Security Income (SSI) and TennCare (Medicaid). You’ll want to have a contingency plan in your estate plan to make sure that their benefits are secure and not at risk of being cut off due to an inheritance. You don’t want their government assistance to decrease just because you died! You definitely need a plan for that. Make sure to work with a qualified estate planning attorney so you can refrain from making errors with your family’s benefits.
If you want control over who can access your digital assets, you must make a Will
Many digital assets are governed by terms and conditions which are unlikely to specify who will take over your accounts when you die. Some providers, such as Facebook, permit you to designate someone as a “legacy contact.” However, not all companies are robust enough to provide this type of service. A Will protects your digital assets from falling into the wrong hands or being lost in digital space with no one able to claim them. Check out our blog post about how to create or change your Facebook “legacy contact” here.
In conclusion
These are just a few of the things that you’ll want to consider when making an estate plan. I want to encourage you to have a long discussion with your spouse about how your assets should be split when one of you dies. There shouldn’t be any surprises! I cannot stress the importance of knowing each other’s values and putting them in writing. It is crucial to have the outcome you desire. A failure to plan can end up in expensive court litigation. This is why we encourage everyone to speak with an experienced estate planning attorney about how they and their spouse can protect each other through proactive planning.
Are you ready to make your Will? Schedule a free initial call and make your plan with the Team at GALS!
