Too Many Cooks in the Kitchen

There are a lot of different phrases and slogans to describe a situation where you have too many people in charge. Democracy may be preferable in some situations, but your estate plan is often not one of those situations. People often tell me they want to be fair so they want to name all their children as executors, trustees or powers of attorney at their death or incapacity. They feel that naming everyone will insure that things go smoothly and that there is no tension among the siblings that one child was treated preferentially. In fact, naming multiple children does not relieve tension or promote harmony…it creates tension, confusion and sometimes complete chaos.

As I frequently tell the disgruntled sibling who is upset that his or her brother or sister was named as trustee or executor, serving in these roles is a job, not a privilege. As a beneficiary, you get to sit back, let someone else do the work and then collect the proceeds. As an executor or trustee, you have to do all the work, deal with the disgruntled beneficiaries and then receive, in many cases, the same proceeds as the person who got all the benefits without any of the work.

The decision as to who will serve in these important roles is a big decision and should not be taken lightly. But in many cases, less is more. One person or entity is often the best choice. Two can insure that checks and balances are in place in case one person is out of line. More than two guarantees administrative headaches, fighting and taking sides. The administrative process of probate and trust administration is challenging enough because it usually involves families and money, two very emotionally-charged topics. When you add the grief from the loss of a loved one, too many cooks in the kitchen adds insult to injury. Instead of looking at what will be viewed as the most fair, consider who is the best-suited for the task and the most able to navigate family issues and money. In so doing, the result is often more fair for everyone. Unfortunately, fair or not, too many cooks in the kitchen rarely leads to a desirable result.

Capacity to Make a Will in Tennessee

capacity to make will, TN estate planning lawyer

Capacity to Make a Will in Tennessee

As an estate planning and probate lawyer, I’ve handled cases from time to time where a person’s capacity at the time he or she created a Will or Trust was an issue. The elderly have increasingly become targets for those looking to prey on their physical and/or mental weaknesses. Additionally, people are living longer, and Alzheimer’s and dementia are becoming more and more common. Given all these factors, it is likely to continue to be an issue, especially when a person of advanced age changes or attempts to change beneficiaries.

What is a Self-Proving Will?

In most cases, a Will prepared by a lawyer includes the statements of 2 witnesses and a notary so that the Will is what is referred to as “self-proving.”  If the Will is not self-proving, it must be “proven” after the person dies.  In any case where there are handwritten notations or the document is totally handwritten, capacity of the person making the Will must be established.

Standard for Testamentary Capacity to Execute a Will in Tennessee

The general standard in Tennessee for capacity to execute a Will or a Trust is that the Testator (i.e., the person leaving the Will) be “of sound mind and disposing memory.” A person who does not have the capacity to conduct general business transactions or to enter into a contract can still have the required testamentary capacity to execute a Will or Trust. Two key factors in determining whether this standard is met are that the person must understand (1) the nature and effect of the act, and (2) the extent of the property the person is seeking to dispose of.

Whether a person is “of sound mind and disposing memory” is easy to determine when he or she is at one end of the spectrum or the other. Unfortunately, capacity is often not an all-or-nothing deal but falls somewhere in between the two.  When a person whose capacity is questionable tries to make notes or create or modify a Will or Trust, it can be very hard to determine after the fact. Obviously, the opinion of the person’s physician is always preferable and can often help prevent questions later.

Without capacity to make or modify a Will, the person’s intent may not be able to be carried out, even if there is no question as to what he or she wanted or was attempting to accomplish.

Your Legacy is Too Important to Leave to Chance.

Proper execution of  testamentary documents (i.e., Will, Trust, etc.) can avoid confusion later after you die, which is why it is important to consult an attorney when planning for your beneficiaries. The goal of testamentary documents is to accomplish your goals and objectives. What a shame if your intentions are not fulfilled due to a legal technicality or because a document was not executed properly.

If you would like to learn more about planning for your estate, please call us at 901-372-5003 or visit the Estate Planning page on our website.

Law FAQ: Why can’t I name my minor kids or grandkids as beneficiaries?

You can certainly leave assets to your children and grandchildren if you do so correctly, and there are a number of options to choose from when planning for minor beneficiaries. The problem comes in when minor beneficiaries are not properly planned for, which usually occurs when a minor is named as a beneficiary on a beneficiary designation form (e.g. life insurance beneficiary or retirement account beneficiary) or outright in a will or trust (e.g. $15,000 to each of my grandchildren).

Why? Minors cannot legally hold property in their own name. An adult (custodian, trustee or guardian) must hold the assets for the minor’s benefit until the child reaches a certain age. In Tennessee, the legal age at which they can receive or own property directly is eighteen (18). In your estate plan, you can change the age at which you want them to receive the funds, but the minimum is eighteen. When a minor is named as a beneficiary or left an outright distribution in a will or trust, someone has to petition the court to be appointed guardian of the child’s property. Even if a natural parent and legal guardian is involved, the parent would have to seek to be appointed and subject to the court’s supervision in the management and expenditure of any funds. Custody and legal guardianship of the person of the child are not alone sufficient to handle the child’s funds absent a guardianship. I have been involved in many cases where a child’s natural parent has to be appointed as guardian and subject to the court’s ongoing supervision regarding their child’s funds because the other parent is deceased and the child was the beneficiary on the life insurance.

In some cases, the funds can be deposited with the court clerk, and the child can petition the court to release the funds when he or she reaches the age of 18. In other cases, an ongoing guardianship is required, which involves court approval for expenditures, annual accountings and sometimes a great deal of time and expense.

What should you do? I will talk more about some of the options for leaving funds to your beneficiaries in the coming weeks.  But for now, make sure you do not have your minor beneficiaries named on any beneficiary designation form.  If you would like to learn more about the options for your beneficiaries, please contact our office.

 

Probate Process: How long does it take?

probate process, how long does it takeHow long does the probate process take? I often pose this question at seminars and get a variety of answers. Two of my favorite answers are “years” and “forever.” While neither answer is correct, it typically indicates that someone in the room (or perhaps a friend or neighbor) has had a bad experience with Probate Court at some point. In Tennessee, a Probate Estate must remain open for a minimum of four (4) months from the time of first publication. This period is designed to give creditors time to come forward and assert a claim against the Estate.  An Estate must remain open the full four (4) months regardless of whether the deceased person had any debts.

Time Starts to Run on the Date of “First Publication”

When an estate is opened in Shelby County Probate Court, the clerk’s office notifies The Daily News, and they publish a public notice regarding the opening of the Estate, typically within a week of the opening of the Estate. This first publication marks the start of the four (4) months, and the Estate cannot be closed until 4 months after the date of first publication.

However, bear in mind that this is a minimum amount of time, and there is no guarantee that the Estate can be closed at the end of the 4 months. I frequently tell clients that 6-9 months is a more realistic average for a straightforward Probate Process. The “first accounting” is not due until 15 months from the opening of the Estate, so if the Estate is closed out within that 15 month period, you are still doing pretty well.

Why does the Probate Process take so long?

So what makes the probate process last beyond the 4 months? A number of factors often contribute to how long a Probate Estate is open. Preliminarily, there are 8-10 steps that must be completed for every Probate Estate regardless of the size of the Estate, the cooperation of the Beneficiaries, or the debts of the deceased person. If these steps have not been completed or if the proper letter has not been received from Tenncare of the Tennessee Department of Revenue, the Estate cannot be closed. If there are minor Beneficiaries involved and the Will does not contain instructions on holding those funds in trust, we often have to seek court guidance and have additional hearings regarding handling these funds. Likewise, if Beneficiaries are fighting, the Probate Process will often take significantly longer than the 4 month minimum. If the decedent left a number of debts, and creditors have filed claims against the Estate, each valid claim must be paid in full or settled before the Estate can be closed. If the decedent had property in more than one state, the process can take much longer. These are just a few of the factors that can contribute to a lengthier Probate Process.

Every Probate Case is Different

Although the correct answer is rarely, if ever, “years” and definitely not “forever,” the Probate Process can last much longer than Beneficiaries are expecting. The Probate Estate that is open for years is not the norm, but most attorneys who do a lot of Probate work will typically have at least a couple of cases that drag on for one reason or another. In many cases, where everything is straightforward, 6 months should be a reasonable estimation of how long it takes. Unfortunately, we often can’t predict when we open an Estate the circumstances that may arise, so while it may seem simple on the front end, it could also turn out to be more complex. If we know some of the complicating circumstances in the planning stages, we can often  incorporate strategies to avoid some of the Probate pitfalls.

Need help with Probate Court?

Please call us at 901-372-5003. We know you have a lot on your mind and the thought of going to court can be overwhelming. We are experienced probate lawyers and we can guide you through the Probate Process.

How to Avoid Probate

Did you know that you can eliminate the Probate Process altogether through revocable living trust planning? If you would like to learn more about Probate or about planning to avoid probate, please call us. We can guide you through an Estate Plan designed specifically for you and your family.

Law FAQ: My mom’s will leaves everything equally to me and my sister. Why am I not getting anything?

A person’s will only applies to assets or accounts that are in the person’s sole name or are payable to the person’s estate.  Typically, we are dealing with assets in someone’s sole name name if we are looking at someone’s will.  I frequently tell clients that assets are often payable to someone’s estate on accident.  For example, assume mom’s husband was named as beneficiary on her life insurance policy.  He dies several years before her, and she never added another beneficiary and does not have a contingent beneficiary on the policy.  In most cases, that policy will say her estate is the beneficiary by default.

The important thing to note is that jointly-owned assets and assets with a beneficiary designation do not pass pursuant to mom’s will.  They pass upon death by operation of law, which means that jointly-owned assets pass to the surviving owner and accounts with a beneficiary designation pass to the named beneficiary on the account, regardless of what mom’s will says or if she has a will.  These assets do not pass through probate, and mom’s will does not apply to these assets.  So, if sister was the joint owner on mom’s checking account and CDs because she was the primary caretaker, the checking account and CDs belong to the sister upon death, even if the will specifically says everything is to be divided equally between the children.  This means that your sister gets everything, and you get nothing.  The will simply does not apply to the distribution of these assets.  To add insult to injury, if your sister wants to fulfill mom’s intent, she may have to deal with gift taxes and the gift tax ramifications of splitting the accounts with you.  Thus, even if sister wants to split the accounts because she knew what mom wanted and wants to comply, she may not want to split the accounts bad enough to pay gift tax on the transfer from her to you.

In many cases, this result is not what mom wanted or intended.  I will be posting more in the coming weeks about intent versus content because all too frequently the content of someone’s will or trust or the structure of their assets do not coincide with what their intent.  After someone dies, it is often too late to reconcile the two, even if most people involved agree as to what the person’s intent was.  An effective estate plan can prevent this disparity between intent and content.   Unfortunately, the true test of an estate plan occurs after someone dies when it is often too late to go back and correct the discrepancy.  Please contact our office if you need assistance in establishing an estate plan or determining if your plan accomplishes your goals and intentions.