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Do I Need A Trust in Tennessee?

 

Image of a Last Will and Testament document

When it comes to estate planning, you’ve probably heard advice like, “You need a trust” or “Avoid probate at all costs.” While these ideas might hold true for some, not everyone needs a trust, and probate can sometimes be an appropriate step. Understanding these topics can help you make informed decisions for your family. Let’s break down why:

What Is a Trust?

A trust is a legal arrangement that allows you to transfer assets to a Trustee. This person manages the trust for those you want to benefit. One of the advantages is that it helps avoid probate—the court-supervised process of transfering your assets after death. Trusts can provide an additional level of privacy, speed up the transfer of assets, and offer protection for your loved ones in difficult times.

Disadvantages of a Trust

While trusts offer many benefits, they aren’t essential for everyone. For example:

  1. Simpler Estates May Not Require a Trust
    If your estate is fairly small, a trust may be unnecessary. Many people can pass on their assets effectively through other methods, like beneficiary designations or joint ownership, without needing the structure or expense of a trust.
  2. Trusts Can Be Expensive
    Setting up a trust requires meeting with an attorney to prepare the trust documents and potentially hiring professionals to administer it, which can be costly. For some individuals, these expenses outweigh the potential benefits, particularly if there are simpler ways to achieve the same goals. For example, if your family is in agreement, the Court can waive the requirement of making your assets public. 
  3. Trusts Need Active Management
    Once a trust is created, it needs ongoing attention. You have to transfer assets into the trust, update it as your financial situation changes, and ensure that it remains aligned with your wishes. This level of involvement is unnecessary if simpler tools can efficiently achieve your goals. 

How to Save Money on Your Estate Plan with a Will vs. Trust

You’ve probably heard that you want to avoid probate. But in many cases, it’s not as bad as you may think. In fact, sometimes it’s a good thing!

  1. In Some States, Probate Is Streamlined
    Each state has its own process for probate. Some states, like California and Florida, are complex enough that having a trust is a good idea for most people. However, in Tennessee, probate can be relatively quick, inexpensive, and straightforward, making it less of a concern. Of course, it’s a good idea to listen to your attorney about what is best for your family. 
  2. It Provides Oversight
    Probate ensures that a court oversees the distribution of assets, which can be beneficial for resolving disputes or ensuring that creditors are paid. For families with potential disagreements, this legal oversight might prevent further conflicts.
  3. Not All Assets Go Through Probate
    Assets such as life insurance policies, retirement accounts, and some jointly owned property pass directly to beneficiaries. If your estate consists of these types of assets, putting them in a trust may not make much sense. In fact, many people structure their estate planning so that nothing will go through probate and then use a will as a back-up plan. (Because you know we always want to have a back-up plan!)

Is a Trust Right for Me?

While it may not be for everyone, a trust may be a good choice if:

  • You have a large or complex estate.
  • You own property in multiple states (which could trigger probate in each state).
  • You want to maintain privacy regarding the distribution of your assets.
  • You have minor children or beneficiaries who require special care.

Depending on your situation, your attorney may even recommend using a trust as a part of your will, which can be less expensive and time-consuming than creating a stand-alone trust. 

Estate planning is not one-size-fits-all, and the decision to create a trust should be tailored to your unique situation.  Your estate planning attorney should be able to help you weigh the costs and benefits, address any “what ifs, and explain how the plan reflects your goals. Ultimately, the key is to create a plan that provides peace of mind for you and your loved ones, whatever form that may take.

If you have questions about trusts or other estate planning tools, reach out to our office. We’re here to help you navigate the process and make the best choices for your future.

My partner and I are committed but we don’t plan to get married. What legal protections do we need?

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. 

a man and woman sitting on a park bench looking at each other. They are unmarried in Tennessee and wondering what legal protections they have in place.
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.  

The Future of the Federal Estate Tax- 2021 and Beyond

The Future of the Federal Estate Tax- 2021 and Beyond

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.