901.372.5003 24/7 Live Call Answering
July 11, 2016 In Contracts, Estate Planning

Joint Property Ownership Pitfalls and Solutions

Joint Property Ownership Pitfalls and Solutions

joint property ownershipOur law firm has worked on a couple of cases lately involving joint property ownership; that is, property owned by a group of several individuals. Owning a piece of land or real estate with a group of individuals or family members can lead to many problems, a few of which we will discuss here.

What Happens to Real Estate When a Person Dies?

In Tennessee, real property typically passes outside of Probate in accordance with the publicly recorded property documents in the County where the property is located.  A person can also plan for the disposition of real property in a Will or Trust.  If you die owning real property in your sole name, though, it can cause significant problems for your Beneficiaries that can be avoided by proper planning.

In both cases I mentioned above, the group of individuals came into joint property ownership because of intestate succession (i.e., dying without a Will).  You may think that you do not need a Will because your property will pass to your heirs regardless.  However, there are many problems and burdens that your heirs will face if property passes to them through intestate succession.  Here’s what can happen if a landowner dies without a Will:

  • Land may pass to heirs who do not wish to be landowners.
  • Land may pass to heirs who do not know that they are now landowners (i.e. lost heirs).
  • Land may pass to heirs who are not prepared for the responsibility of owning real estate (i.e. paying real estate taxes, maintaining insurance, upkeep of the property)
  • If there is a mortgage, payments may be required very soon after the death of the original owner and before any inherited owner has a chance to determine how to address the new ownership – i.e. sell the property, allow it to be foreclosed upon, etc.
  • The title to the property will be unclear and extra effort will be required to determine all legal owners in a joint property ownership situation. It can be very difficult to locate heirs and to determine with certainty who all owns a piece of property, especially if some of the original heirs have died, or if the family isn’t in close contact or is spread across the country. A title search may be required, and title searches can be expensive.

Increased Costs for Inherited Owners

When a piece of property passes through intestate succession, when ownership is unclear, or when a piece of property is owned by a large group of individuals, there will be extra expense involved when the property is sold. As a general matter, the entire sales process will take longer than usual. Each separate legal owner must be found and consulted with.  Then, each owner must agree to all parts of the sale process (i.e. negotiating the price, negotiating and completing repairs, and signing all required paperwork).  It can be very difficult getting a group of family members or individuals to all cooperate and agree during the course of a real estate transaction.

Inherited owners who want to sell property can expect to have to do some additional work with the buyer’s title company such as filing probate documents, getting releases from TennCare, and dealing with potential creditors of the deceased person.  A title company may require proceeds to be escrowed for up to a year after the deceased person’s death.

Legal Issues of One Owner Can Affect Other Owners

Inherited and multiple owners can also come with their own personal problems.  A judgment lien or a bankruptcy filing of one inherited owner will immediately attach to the inherited property, which could cause delays and problems for any co-owners wishing to sell the property.

Ways to Avoid Common Problems of Joint Property Ownership

If you must own property with a group of individuals or family members, or if you desire to pass property to a group of people, there are ways you can accomplish joint property ownership which lessen the burden and expense involved. Speak with an Estate Planning Attorney or Property Lawyer about the best way to achieve your personal goals. For example, more effective “joint ownership” can be achieved in the following ways:

  1. Own as Joint Tenants with Rights of Survivorship. This type of ownership is common with married couples, but it can also be used with any individuals wishing to create this type of joint tenancy.  Upon the death of one joint tenant, the remaining tenant owns the property outright.  This results in protection from a debtor-tenant’s creditors because liens can only attach to the right of the debtor-tenant, which is nothing more than a “potential survivorship right.”  This protection ends if the non-debtor tenant dies and the debtor- tenant then owns the property outright.  One negative of this type of ownership is that the property will only pass to the other joint tenant, so the Estate of the first to die loses any equity to pass on to other individuals.  In addition, potential gift tax issues may arise since the Grantor is “gifting” rights to the property to the person they are creating a joint tenancy with.
  2. Own the Property in a Limited Liability Corporation.  Ask a business organization attorney about property ownership through an LLC. The rights of the members will depend on the structure of the LLC. Creating an LLC requires maintenance of paperwork to the State to keep the LLC active which will be required if the LLC wants to sell the property.
  3. Put the Property Into a Living Trust.  This is achieved by conveying the property to a Trustee on behalf of a Trust. (A Trust itself can’t own property; rather it must be an individual Trustee on behalf of the Trust.)  The property will then be maintained and distributed in accordance with the Trust Agreement.  A Living Trust allows the Grantor to make changes during his or her lifetime (therefore keeping control and autonomy) but also allows for the streamlining of management and an easy transition of the property upon the death of the original Grantor.  The successor Trustee can sell or manage the property outside of Probate, and depending on the Trust terms, without the input of or disruption to the Beneficiaries.

Beneficiary Deeds

Tennessee does not offer this, but some states allow the use of a Beneficiary Deed to clarify how a property is to pass upon the owner’s death. Essentially, a Beneficiary Deed lets a person name a beneficiary and only takes effect upon the death of the owner. Ask your Estate Planning Attorney about the availability of Beneficiary Deeds if you own property in multiple states.

Right to Partition

If you are tied up in joint property ownership, or if you own a piece of property with a group of individuals or family members and you want to end the relationship and go your separate way, you can. In Tennessee, you have the legal right to what is called “partition.” Speak with a civil litigation attorney about filing a partition lawsuit. In this kind of lawsuit, you ask the judge to partition the property, either “in kind” or “by sale.”

Need Help with a Property Ownership Issue?

Have questions about joint property ownership or other real estate issues? Please call us at 901-372-5003 or send Patterson Bray an email.

June 13, 2016 In Estate Planning

Don’t be like Prince: Get a Will.

prince died without a will, memphis estate probate lawyer

Learning from Prince’s Mistake

It’s been widely reported that Prince probably died without a Will. This has left many people wondering:

How could someone rich and famous like Prince die without a Will?

Unfortunately, it is not uncommon for people, even the super-wealthy, to to die without even the simplest form of an Estate Plan. While at least one source reports that Prince’s Estate may be worth less than what people think, this surprising omission of someone of Prince’s celebrity status should give us all cause to stop and think about what might happen to our own families and hard-earned assets in the event of an untimely death.

2 Simple Reasons to Have a Will or Estate Plan

When we meet with potential clients and give basic estate planning seminars, we stress the importance of having, at the very least, a basic estate plan in place. This is important because:

1. Your wishes will be known. Have you ever tried to guess what another person wants? This is why many of us find Christmas shopping very stressful. The only way you can be sure to “get what you want” is to properly (and legally) communicate your wishes and desires. Just telling someone won’t cut it. After all, neither a judge nor your family will be able to ask you after your death.

2. You can help prevent family feuds and division. You may think your family is so tightknit that they would never quarrel over your assets after you die. You may be right, but you may also be wrong. Why take the chance? Make your wishes so clear that your family members have nothing to fight about amongst themselves after your death.

An Estate Plan is important regardless of your financial status. You do not have to be “rich” to need a Will. Even if you think you don’t have enough assets to justify planning ahead, it is likely that your possessions have real meaning to family members or friends. It is also likely that you have a larger Estate than you may realize.

2 Simple Reasons People Don’t Have a Will or Estate Plan

1. Fear of Losing or Giving up Control. Like Prince, many people like to retain complete control over their assets and business affairs. There’s not a thing in the world wrong with this. However, having an Estate Plan does not mean that you lose control! In fact, Estate Planning is a way to extend the control over your affairs “beyond the grave.”

2. Death is an Unpleasant and Uncertain Event. People often put off any planning or do not want to think about their passing. It is easy to procrastinate and it always seems like planning can be left for another today. However, death is an unfortunate reality for us all. As Benjamin Franklin once said, “In this world nothing can be said to be certain, except death and taxes.”

What happens without a Will?

If you don’t have an Estate Plan or Will, in Memphis and Nashville Tennessee, your Estate, like Prince’s, may become subject to state law and Probate Court orders. This is likely to lead to familial dissension and excessive fees and costs for the Estate, which in the end reduces the amount of assets remaining for your Beneficiaries. Your money may also wind up going to the Government! For example, in Prince’s case, the Probate Court has appointed a Corporate Executor for his Estate, and many attorneys will be involved because of the number of potential Beneficiaries. There will be many questions as to how the royalties and future earnings from Prince’s music will be handled. Estate taxes will have to be paid. All of these factors will lead to a lot of money being spent (and some might even say “wasted”). All of the headaches and money spent, as well as the publicity involved, could have been avoided, or at least minimized, if Prince had planned ahead by having a Will or Estate Plan.

Moral of the Story:  Don’t be like Prince.

Don’t be like Prince. Plan ahead now! Having an Estate Plan is easy, and every person can and should have one in place. A basic plan can be relatively inexpensive, even if drafted by a licensed Tennessee estate planning attorney, like the ones at Patterson Bray.  We have offices in Memphis and Nashville. In Tennessee, and some other states, it is also possible, although often not recommended, for a handwritten Will to be valid. To read our blog post about handwritten wills, CLICK HERE.

Need a Tennessee Estate Planning Lawyer?

Call Patterson Bray if you’re in the Memphis or Nashville area at 901-372-5003 or email us here.

April 12, 2016 In Estate Planning

Basic Asset Protection in Tennessee

Basic Asset Protection in Tennessee

asset protection lawyer, asset protection attorney, memphis How do you achieve asset protection? How do you best limit your liability and protect the assets and investments you have spent so much of your life building up?  While you cannot completely eliminate exposure to potential liability, you can achieve asset protection through the use of simple techniques, like buying the right kind of insurance, or through the use of more sophisticated tools like asset protection trusts.


General Layers of Asset Protection Planning

  1. Purchase Protective Insurance.  Examples: long-term care insurance, professional liability insurance, and umbrella personal liability coverage. Insurance is the simplest and most affordable way to protect your assets.  When our clients ask us if we think they have enough insurance, we always tell them that you can never be over insured.
  2. Utilize Statutory Law Protections.  Examples: ownership of real estate as tenants by the entireties, homestead exemptions, retirement plans, and life insurance or annuities.  Real property owned by a husband and wife as tenants by the entirety is exempt from the separate creditors of each spouse.  Additionally, other statutory protections provide that specific assets may be protected from creditors in certain circumstances.  For example, in Tennessee, life insurance passing to a surviving spouse or child passes free of the claims of a decedent’s creditors.  You should consult an attorney to find out which of your assets may be statutorily protected.
  3. Domestic Asset Protection Trusts.  Tennessee is only one of a handful of states that has a specific statute allowing an individual to create a self-settled asset protection trust.  This means that a person can create the trust, have control over certain aspects of the trust, and also be a beneficiary of a trust.  The rules governing these types of trusts are very specific.  These types of trusts are also available in Mississippi, Delaware, Alaska, and Nevada. If you are interested in learning more, click here.
  4. Domestic Entity Planning.  Example: Wyoming Close LLC.  An LLC, unlike a corporation, allows the members of the entity to separate their personal liability from their liability as members of the company.  The most enticing feature of an LLC is the fact that a creditor of the LLC cannot attach the personal assets of the LLC’s members.  We prefer using a Wyoming LLC because the laws in Wyoming are among the most favorable in terms of the protection an LLC provides.


Need an Asset Protection Attorney to Help Protect Your Assets?

We are experienced asset protection attorneys with offices in Memphis and Nashville. We can help develop a plan to best suit your individual needs. Call us today at 901-372-5003 or email us here. 


Asset Protection Planning 101

It is not uncommon for people to have diligently planned and saved for financial security yet fail to implement any type of plan to protect those assets they have amassed. This leaves them vulnerable to asset seizure in the event they lose a lawsuit or are pursued by creditors. This is why it is so critical to work with a seasoned attorney who specializes in asset protection. The attorneys at Patterson Bray PLLC can sit with you and go over asset protection 101 in a way that is understandable and reassuring.


Benefits to Asset Protection

There are many benefits to having taken the steps to legally protect your assets. These can include:

  • Asset protection from creditors
  • Asset protection from divorce settlements
  • Asset protection from excessive medical bills when no health insurance or limited health insurance coverage exists
  • Asset protection from lawsuits
  • Asset protection from nursing homes or other assisted living facilities
  • Business asset protection from lawsuits, creditors, or other claims
  • Inheritance protection for adult children from divorce and/or creditors


Working with Our Asset Protection Law Firm

When you work with an attorney from Patterson Bray PLLC, we will work to develop strategies that will be specifically made for your situation. Some of the more asset protection 101 tools we can utilize include trusts and Family Limited Partnerships (FLP). Your attorney will also examine the different retirement accounts our clients have to ensure that they are maximizing the contributions made to their pension, 401(k), and IRAs. This not only benefits the client in increasing the amount of money they will have saved when they retire, but it also protects those assets in the event a creditor wins a judgment against the client or they lose any other type of lawsuit

Your asset protection attorney may also tell you that increasing the amount of insurance coverage you have may be beneficial. This can include homeowner’s insurance, business insurance, or a personal umbrella policy. Having significant liability insurance coverage can help minimize risks to your assets in the event of a lawsuit.

If you are a small business owner, your attorney will also examine the type of business structure you have set up. This can help to ensure that your personal assets are protected from any business liabilities that may arise. This is often done by creating a Limited Liability Company (LLC). By forming an LLC, small business owners will not be personally liable for any debts, judgments, or other liabilities of the business, and their personal assets and property are protected.


Call Our Office Today

If you would like to learn more regarding asset protection 101 and how to protect your family and/or business in the event of legal or financial issues that may arise, call Patterson Bray PLLC to schedule a free and confidential consultation.

 

 carlisle dale, memphis asset protection

By:      Carlisle Dale

Patterson Bray

8001 Centerview Parkway, Suite 103

Memphis, Tennessee 38018

(901) 372-5003 Office

(901) 383-6599 Fax

www.pattersonbray.com

 

 

January 27, 2016 In Estate Planning

Estate Planning And Divorce

estate planning lawyer, probate lawyer

Estate Planning And Divorce

Let’s talk about Estate Planning and Divorce. Will a divorce affect your Will? Over the years, many people have asked us about how a divorce will affect a Will or Estate Plan. Sometimes the question comes out of curiosity, and at other times, the person asking has just gone through a divorce. The best time to review or establish an estate plan is after the occurrence of a major life event.  In fact, these are often the only times many people even think about estate planning.

Major life events may include marriage, the birth of a child, or the death of a family member. Unfortunately, divorce is also a major life.

Beneficiary and Executor Designations

Typically, married couples have their estate plans drafted at the same time, and the terms of each plan are very similar. More often than not, one spouse has named the other as the executor of his or her Estate, as well as the sole beneficiary of his or her Estate.  While  Tennessee law contains a statute that essentially disinherits a person’s spouse in the event of divorce, that statute does not affect beneficiary designations or the titling or re-titling of assets.  Therefore, we do not advise that you rely on this statute alone.

In addition to reviewing your Will and other estate planning documents after a divorce, it is also important to  review the ownership structure and beneficiary designations of any assets that will not pass under the terms of your Will, such as retirement plans or life insurance policies.  Many assets, such as these, do not pass pursuant to the terms of a person’s Will, but rather will be distributed according to beneficiary designations.

Legal Guardians for Minor Children

In Tennessee, the only way to designate a legal guardian for a minor child in the event that something should happen to you is under the terms of your Will.   The person you choose to designate as the guardian of your child while you are married may greatly differ from whom you would select to fulfill the role after a divorce.

Let us help you with Estate Planning and Divorce Issues

As you can see, it is extremely important to undergo a comprehensive review of your assets and estate plan in the event of a divorce. If you have recently experienced a divorce or other major life event, or if you would like us to create or review an estate plan for you, please call us at 901-372-5003. We’re ready to help you.

November 15, 2011 In Estate Planning

Who are my Beneficiaries? A critical question in planning for the future.

beneficiary designations estate planning lawyer

How does Property Pass to Beneficiaries?

Do you know who your beneficiaries are? When we ask clients this question, their first response is often quick and affirmative. However, we frequently discover through the estate planning process that the beneficiaries listed on our clients’ life insurance policies and retirement accounts are not who they think they are, nor are they the intended recipients of the property.

One of the most common misconceptions we see is how property passes at someone’s death.  Accounts that have beneficiary designations  pass to the beneficiary or beneficiaries named on the beneficiary designation form for that account regardless of what your will or trust says.  So, for example, if my Will says that everything passes to my spouse at my death, but my beneficiary form on my life insurance names my children as beneficiaries, my life insurance proceeds  pass to my children and not to my spouse. Here are some examples of accounts that typically designate beneficiaries:

  • life insurance
  • retirement accounts
  • transfer on death accounts (TOD)
  • payable on death accounts (POD)

Periodically Review Your Beneficiary Designations

The  Supreme Court case of Kennedy v. Plan Administrator of DuPont highlights the unintended results that may occur if your beneficiary designations are not reviewed periodically.  In this case, William Kennedy named his wife, Liv, as the sole beneficiary of his pension and retirement savings plans at DuPont.  When the couple later divorced, the Qualified Domestic Relations Order (QDRO) provided that Liv gave up her rights to receive any benefits from William’s pension and retirement plan.  Unfortunately, however, the court order was never submitted to DuPont and the beneficiary was never changed.  When William later died, DuPont paid out the plan benefits to his ex-wife, Liv.  Their daughter, Keri, was appointed as Executor of William’s Estate and filed suit claiming that the Estate should receive his retirement benefits because the QDRO clearly provided that Liv had waived any interest she might have in those benefits.  The Supreme Court upheld the ruling of the Circuit Court in saying that DuPont properly paid the benefits to Liv and that Liv was entitled to the pension and retirement funds even though the parties were not married at the time of William’s death and the QDRO clearly provided otherwise.

Moral of the Story

The moral to the story is that the beneficiary designation governs. Thus, it is very important that you know who is named on your various beneficiary forms so that your property goes to the beneficiary or beneficiaries that you intend for it to go to.  It is clear that William did not intend for his benefits to go to his ex-wife instead of his daughter, but the Supreme Court held that the beneficiary designation governed and that DuPont properly paid the benefits to Liv.

Tips for Beneficiary Designation Forms

Here are some tips and common problems to watch out for with your beneficiary designation forms:

1. Do you know where the form is? Generally, employers maintain records of the form, but if they cannot find their form when the time comes, the burden may be on you to produce a copy of the form.

2. Is the form up to date? Changes in your life may require you to review the forms periodically. If you have had a recent marriage, divorce, birth or death in your family, it is important to review your beneficiary designations. And remember, your Will does not change who the beneficiary is on an account or insurance policy.

3. Do you have a contingent beneficiary named? If the beneficiary you have named dies before you or is involved in a common accident with you, you may not know who the benefits will go to if you do not name a contingent or secondary beneficiary.

4. Have you named a minor as a beneficiary? Minors cannot legally hold title to property, including these benefits. If you have named a minor, a guardianship may have to be established and administered through the Probate Court concerning applicable funds.

Want to talk it over with an Estate Planning and Probate Lawyer?

If you have questions regarding your beneficiary designations and how they factor into your Estate Plan, please call us at 901-372-5003 or email us today. We’re ready to help you plan for the future.