Why Plan Your Estate?

The knowledge that we will eventually die is one of the things that distinguishes humans from other living beings. At the same time, no one likes to dwell on the prospect of his or her own death. But if you postpone planning for your demise until its too late, you run the risk that your intended beneficiaries -- those you love the most -- may not receive what you would want them to receive, whether due to extra administration costs, unnecessary taxes or squabbling among your heirs.

This is why estate planning is so important, no matter how small your estate may be. It allows you, while you are still living, to ensure that your property will go to the people you want, in the way you want, and when you want. It permits you to save as much as possible on taxes, court costs and attorneys' fees; and it affords you the comfort that your loved ones can mourn your loss without being simultaneously burdened with unnecessary red tape and financial conditions.

All estate plans should include, at minimum, three important estate planning instruments: a durable power of attorney for finances, a durable power of attorney for medical treatment and a will. The first two are for managing your property and health during your life, in case you are ever unable to do so yourself. The third is for the management and distribution of your property after death. In addition, more and more Tennesseans also are using revocable (or "living") trusts to avoid probate and to manage their estates both during their lives and after they're gone.

Unfortunately, estate planning is complicated and the laws surrounding this process are numerous. To effectively navigate the minutiae, it helps to have in your corner an attorney who specializes in this area. We can help you make decisions and can open up avenues you might otherwise not have known existed.

10 Reasons to Create an Estate Plan Now

Many people think that estate plans are for someone else, not them. They may rationalize that they are too young or don't have enough money to reap the many benefits of a plan. But as the following list makes clear, estate planning is for everyone, regardless of age or net worth.

  1. Loss of capacity. What if you become incompetent and unable to manage your own affairs? Without a plan the courts will select the person to manage your affairs. With a plan, you pick that person (through a power of attorney).
  2. Minor children. Who will raise your children if you die? Without a plan, a court will make that decision. With a plan, you are able to nominate the guardian of your choice.
  3. Dying without a will. Who will inherit your assets? Without a plan, your assets pass to your heirs according to your state's laws of intestacy (dying without a will). Your family members (and perhaps not the ones you would choose) will receive your assets without benefit of your direction or of trust protection. With a plan, you decide who gets your assets, and when and how they receive them.
  4. Blended families. What if your family is the result of multiple marriages? Without a plan, children from different marriages may not be treated as you would wish. With a plan, you determine what goes to your current spouse and to the children from a prior marriage or marriages.
  5. Children with special needs. Without a plan, a child with special needs risks being disqualified from receiving Medicaid or SSI benefits, and may have to use his or her inheritance to pay for care. With a plan, you can set up a Supplemental Needs Trust that will allow the child to remain eligible for government benefits while using the trust assets to pay for non-covered expenses.
  6. Keeping assets in the family. Would you prefer that your assets stay in your own family? Without a plan, your child's spouse may wind up with your money if your child passes away prematurely. If your child divorces his or her current spouse, half of your assets could go to the spouse. With a plan, you can set up a trust that ensures that your assets will stay in your family and, for example, pass to your grandchildren.
  7. Financial security. Will your spouse and children be able to survive financially? Without a plan and the income replacement provided by life insurance, your family may be unable to maintain its current living standard. With a plan, life insurance can mean that your family will enjoy financial security.
  8. Retirement accounts. Do you have an IRA or similar retirement account? Without a plan, your designated beneficiary for the retirement account funds may not reflect your current wishes and may result in burdensome tax consequences for your heirs (although the rules regarding the designation of a beneficiary have been eased considerably). With a plan, you can choose the optimal beneficiary.
  9. Business ownership. Do you own a business? Without a plan, you don't name a successor, thus risking that your family could lose control of the business. With a plan, you choose who will own and control the business after you are gone.
  10. Avoiding probate. Without a plan, your estate may be subject to delays and excess fees (depending on the state), and your assets will be a matter of public record. With a plan, you can structure things so that probate can be avoided entirely.

Powers of Attorney

A Power of Attorney is a document that authorizes someone to make decisions on your behalf with respect to finances, property, and medical care and related matters. The person executing the POA is known as the "principal." The person named in the POA to act on behalf of the principal is known as the "attorney-in-fact." A POA is an important document for everyone to have.

If a person does not have a POA and is unable to make decisions, the only alternative is a conservatorship, which involves a formal proceeding before a court. A conservatorship is much more costly and involved than a POA.

There are two main types of powers of attorney that can be used for different purposes. Before executing these crucial documents it is important to understand your options.

Durable Powers of Attorney for Finances

Generally speaking, a POA can be quite broad in scope, authorizing numerous acts including but not limited to, the following: dealing with taxing authorities; procuring insurance; dealing with banks; and making gifts. It is important for a principal to carefully consider the actions the attorney-in-fact is authorized to make. The attorney-in-fact should act only with the principal's best interests in mind. Also, the POA should contain the appropriate language to make it "durable" so the POA survives the incapacity of the principal. If a POA is not durable then it becomes ineffective at the principal's incapacity.

Alternatively, a POA can be limited in scope. In fact, some POA documents are limited for one-time transactions, such as the authorization to sign a title as part of the purchase of a motor vehicle or the authorization to complete a real estate transaction.

Given the current state of the law, the majority of POAs are effective immediately. That means that upon signing of the POA the attorney-in-fact is authorized to act on behalf of the principal. A POA can be "springing," meaning that it takes effect only if the principal is deemed to be incompetent by a licensed physician.

Durable Powers of Attorney for Healthcare

Each of us has the right to make our own decisions with respect to our health care. However, what happens when we are not able to speak for ourselves? This situation can be addressed by a Health Care Power of Attorney, which is a document that allows someone that we nominate to make health care decisions for us. Through the Health Care Power of Attorney, the principal can authorize the attorney-in-fact to make numerous decisions for the principal, including, but not limited to, choices with respect to the scope of treatment and the handling of the body after the death of the principal.

Trustee & Agent Services

A trust administrator, also called a trustee, is responsible for managing assets placed in a trust. A trustee's primary duty is to follow the instructions of the trust instrument. Strict compliance with the trust instrument is necessary. The obligations of the administrator include maintaining accurate records, seeking professional advice when necessary, paying taxes, and making reports to beneficiaries of the trust. Duties also include protecting trust assets, accounting for those assets and making proper distributions to beneficiaries of the trust.

Following the instructions of the trust document is extremely important for a trust administrator. The trustee must carefully read and understand the terms of the document and act in accordance with the instructions. Failure to specifically perform the obligations with diligence could result in a lawsuit; beneficiaries of the trust can challenge decisions made by a trustee and take legal action against her.

Unless a trust instrument gives a directive that one beneficiary be treated differently, a trust administrator must treat all beneficiaries equally and fairly. Even if trust instructions require special treatment for one beneficiary, laws still require that the administrator protect the interests of all beneficiaries. The trustee must be impartial when making decisions and following the directives of the trust document.

A trust administrator must provide accurate information to the beneficiaries upon request. Beneficiaries are entitled to obtain information about the trust assets. This means that each beneficiary may inspect records concerning the trust. A trustee often provides annual statements to beneficiaries or conducts meetings periodically to keep beneficiaries informed. Maintaining detailed records also protects the trustee from false claims.

Beneficiaries, creditors and taxing authorities may raise legal challenges concerning a trust instrument. This means a trust administrator may initiate legal action or defend against a lawsuit to protect the assets of the trust.

We're Here To Help

We work closely with your accountant, financial and other advisors to coordinate the services you need. Depending on your situation, we can:

  • Manage your trust assets
  • Administer the affairs of your trust if you are no longer able
  • Assist your family by handling the complexities of estate settlement

The Jones Law Firm has the experience, knowledge, and objectivity to implement your instructions. When you engage us as your trustee, we:

  • Follow the instructions of your trust agreement faithfully
  • Make decisions impartially
  • Administer your trust consistently
  • Apply compliance standards to administer your trust in accordance with government regulations

No matter how simple or complex your trust needs, we're here to help. We can handle day-to-day administration, asset management, accounting, preparation and filing of tax returns, and recordkeeping.

Depending on your needs, we can serve as your:

  • Agent
  • Trustee
  • Successor Trustee, or
  • Executor

Let us help you determine what may be right for your situation.

Pre- and Post-Marital Agreements

State laws govern the disposition of assets in the event of a divorce; however, state laws vary greatly. With more people marrying later in life, and sometimes more than once, these agreements allow a couple to decide how best to divide their assets.

A prenuptial agreement (also known as a "premarital agreement," or more simply, a "prenup"), is a tool commonly used in Tennessee by engaged couples prior to their marriage. The purpose of a prenuptial agreement is to lay out the wishes of the parties as to the rights associated with and distribution of assets and property in the event of a divorce or the death of either party. By addressing these issues prior to a marriage, when tensions are low, the couple may be able to make any future divorce less acrimonious.

A postnuptial agreement (also known as a "post-marital agreement" or more simply, a "post-nup"), is a tool similar to a prenup agreement; it is created after a couple has been married, rather than before the couple married. Similarly to a prenup, a postnup agreement allows a couple to lay out the wishes of the parties in regards to numerous items, including the rights associated with and the distribution of assets and property in the event of divorce or death of either party, as well as releasing, waiving, and/or establishing rights and obligations as to various claims.

Tennessee State law permits a surviving spouse to elect to inherit a specified portion of the estate of the first spouse to die, regardless of the provisions of the deceased spouse's will. In addition to specifying the division of property in the event of divorce, marital agreements often change these default inheritance provisions, limiting or expanding a spouse's right to inherit property from the other in the event the parties remain married and he or she is the surviving spouse. These agreements are particularly useful when a client wishes to preserve an inheritance for children of a prior marriage, or when the assets include a family business or real estate in which other family members have an interest. Post-marital agreements are also often used by couples that are experiencing issues and desire to separate, but do not want the law to consider all assets acquired during their time apart as marital assets.

The Jones Law Firm can assist you in negotiating and drafting prenuptial and post-nuptial agreements. We are happy to meet with you to discuss your options. We believe that by pre-negotiating the division of assets in the event of the divorce or death of a spouse, prenuptial agreements increase the likelihood of a successful marriage. Parties entering a marriage can plan their future knowing the potential financial impact of losing a spouse.

Domestic Partnership Agreements

Domestic partnership agreements are typically utilized by those not married to outline the legal and financial details of their relationship. If a couple is not married, partners are not given rights under divorce or probate laws, making it increasingly important to address the manner in which assets brought to the relationship by each person are to be owned and shared. Having a domestic partnership agreement in place helps to avoid the struggles frequently encountered when sorting out commingled finances and shared property.

We prepare these agreements for clients of all ages and stages of life, and we also help clients consider alternative ways to protect assets, such as the use of trusts, that in certain cases may obviate the need to have these agreements.

Veteran Aid

Aid and attendance benefits are available to veterans and their spouses who are at least sixty-five years of age. These benefits assist them with the cost of in-home care, assisted living, and nursing home care. Veteran's Administration (VA) aid and attendance is perhaps most beneficial for veterans and their spouses who require an assisted living arrangement since Medicaid does not cover assisted living.
To be eligible, the veteran must have had ninety consecutive days of active duty with at least one of such days during war-time. The veteran need not have been wounded in action or have suffered a service related disability. The veteran must have received a discharge that wasn't dishonorable, and the veteran and his or her spouse must meet the income and asset requirements.

To meet the asset test, a married veteran must have less than $80,000 of assets, and a single veteran (or veteran's surviving spouse) less than $45,000 (excluding a residence, car, and prepaid funeral). To meet the income test, a married veteran must have income less than $21,615 and a single veteran (or the veteran's surviving spouse) less than $18,234. Although these limits may seem low, they are very attainable. With no look back period and no divestment penalty, assets may be gifted to the veteran's children either directly or in trust. The income test is attainable since the cost of assisted living is deducted in arriving at countable income.

It is critical that a qualified elder law attorney such as the Jones Law Firm advise you on the interrelation between aid and attendance and Medicaid eligibility. When qualifying for aid and attendance benefits, care must be taken to not negatively impact Medicaid eligibility. Transfers made in order to qualify for aid and attendance will cause Medicaid ineligibility if made within five years of entering a nursing home. A common strategy employed by the Jones Law Firm for relatively healthy veterans is to divest assets, apply for aid and attendance, and to start the five year look back clock ticking for Medicaid eligibility purposes.