Estate Planning - Frequently Asked Questions (and Answers!)

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If your situation requires a very detailed will or trust, we would be happy to help you thoroughly evaluate your options for a highly-customized estate plan.

If instead you need a simple will, please remember that no estate is too small to benefit from legal advice.  

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What is Estate Planning Anyway?

For most people, a Will is the cornerstone of their estate plan.  Not everyone needs a trust, but Tennessee law is surprisingly well-suited for even modest estates to benefit from having a trust so don’t dismiss that without learing more.

Some people feel that “estate planning” relates only to large estates trying to reduce taxes, but it is much more than just avoiding tax.  Estate planning is an important process of evaluating your needs, who will make decisions for you if you are incapacitated, and how best to pass your assets to your family after you have died.  In short, estate planning involves thinking about the future and obtaining expert advice and counsel on how to achieve your wishes.

We work alongside accountants, financial planners, and similar advisors to assist you with your estate plan.  We offer independent legal advice and counsel, in addition to the drafting of the legal documents necessary to implement the decisions you have made.

Estate planning is done largely for your family, but it does benefit you by giving you increased peace of mind, knowing that you have taken care of your family’s future in the event of your death or disability.  When done properly, you can avoid undue hassle in settling your estate and avoid costs on the transfer of your assets.  

What is a Will?

A Will is a legal document that governs the distribution of your assets at death, naming one or more persons to manage the estate and providing for the distribution of all property at death.  There is no legal requirement that a will be drawn up by a lawyer, although there are pitfalls into which home-made wills can fall, such as not properly witnessing it or including unclear language that requires a judge to interpret was was intended.

Unfortunately, more than half of all adults don't make use of this essential estate planning tool.  It's especially important to draft a Will (or revise an existing Will) when you get married, have children, accumulate sizable assets, or experience any significant change in your financial or personal circumstances. 

Why is a Will important?

If you die without a Will, in legal terminology, you are “intestate.”  Your estate is then distributed according to the intestate laws of the state in which your property is located.  These laws typically favor the surviving spouse, though he or she won't necessarily receive the entire estate.  In any case, the distribution of assets has been taken out of your hands, and there is no guarantee that the results will reflect your wishes.  More importantly, if you have minor children, the probate court will have jurisdiction over your children and who takes care of them until they reach age 18.  In our experience, the court actually does, more often than not, choose appropriately - but why take a chance on such an important decision?

In addition to dictating how your assets will be distributed and who you want to care for your minor children, your Will names your “executors” or “personal representatives,” who are the people you appoint to carry out your wishes.  Practically everyone needs a Will. 

What is a Living Trust?

A growing number of people are choosing Living Trusts to add a level of convenience for their family.  A Living Trust avoids probate and allows heirs to receive from the estate immediately, without the four (4) month delay imposed by Tennessee probate laws to pass property under a Will.  A Trust is a legal arrangement in which a party (called a trustee) holds legal title to property for the benefit of one or more beneficiaries.  Rather than hold on to assets that you intend to use for the eventual benefit of others, you transfer ownership to a trust, a legal entity established by you and controlled by the trustee.  In most circumstances, you will serve as trustee - and thereby keep full control over your assets during your lifetime.  

Everything you currently own and control can be placed in such a Trust in which you continue to own and control it, but with the benefits described herein.  Assets previously owned by John Smith could, for instance, now belong to "John Smith, Trustee of the John Smith Living Trust, under Declaration of Trust, dated January 1, 2014."  

You can still sell property in your Trust, transfer assets into and out of the Trust, and even revoke the Trust.  Nothing has changed except the title of ownership attached to your property.  Most people include the bulk of their assets in a Living Trust.  A Living Trust especially makes sense for property owned in another state.  A vacation home in another state, for example, can be kept out of that state's probate courts with a Living Trust.

So why would I want to create a Trust?  

A Trust can serve a number of goals.  You might arrange for your spouse to receive investment income from the Trust, with the principal to be distributed to your children after the death of your spouse.  Or you might stipulate the circumstances under which assets are to be distributed to your beneficiaries. You can demand, for example, that your children finish college before digging into the Trust fund's principal.  

You can also establish a Trust to provide for the support of a family member with special needs, such as a disability that prevents him or her from working.  Some people establish Trusts simply to maintain their estate's privacy.  Unlike a Will, a Trust is not a public document.  The added privacy and ease of transfer that results from avoiding probate is the primary reason so many people are using Living Trusts today.  Another significant benefit of a trust for married couples is that capital gains tax on the first spouse to die can be eliminated with a Community Property Trust.

What is a Power of Attorney?

You have probably heard that you need a “Power of Attorney” and we have discovered that most of our clients have only a vague understanding of it.  These legal documents are relatively straightforward and surprisingly important.  Unlike a Will, a Power of Attorney operates during your lifetime.  It can become operative immediately or upon your inability to act for yourself.  If you become seriously ill, you need someone you trust to be able to handle your financial affairs (pay bills and handle investments for you).  A Durable Power of Attorney is designed to allow a relative or friend (your “agent”) to act on your behalf in the circumstances you set out in the document.

Another document you should consider is a Healthcare Power of Attorney, which names a person to make medical decisions for you if you are unable to act for yourself (in a coma, for example).  It allows that person to handle your medical affairs for you.  A related document is an “advance directive” (typically confusingly called a “Living Will” in Tennessee).  It can be executed if you wish to direct what limitations you prefer to impose on your doctor to artificially keep you alive if you become terminally ill.  This is a serious matter to consider.  For example, many clients express that they do not want artificial life support if they have no hope of recovery and the machine is just prolonging the inevitable.  

So Estate Planning is something everyone needs?

A will, power of attorney for financial, power of attorney for healthcare, and living will are all something everyone needs and should alwasys be included in a complete estate plan.  They allow you to communicate your decisions to your family, which is vitally important should the need arise.  A trust is optional but Tennessee laws favor trusts even for small estates.  Everyone needs to evaluate whether a trust is right for them, even if they determine it is not right for them.

Carpenter & Lewis Estate Attorney Consultation:

As you can see, estate planning is a three-step process.  First, you and your advisors determine a plan of action by applying time-honored techniques.  Next, you and your attorney implement your plan by drafting documents and, oftentimes, by re-titling assets - these are the legal “tools” that are used to apply the techniques.  The third step is the maintenance phase, in which you and the team of professionals you have chosen will periodically (annually or at least every three years) fine tune your plan and see what progress you are making toward your goals.

Carpenter & Lewis Estate Attorney Consultation:  For a consultation with one of the estate attorneys at Carpenter & Lewis, please call (865) 690-4997 or you may prefer to send an e-mail to:
  Consultations are by appointment only.

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