Why do you need Estate Planning?
Many people think of Estate Planning as something that doesn't apply to them. It is typically thought of as being something for older, possibly, retired people or people with substantial assets. This couldn't be further from the truth. Reality is that we All need this type of planning. Estate planning can be done by anyone 18 years or older.
If something happens to you or your spouse, who will take care of your children?
Who makes decisions for you if unable to do so or disabled?
Leave more than just money to your family. Proper planning can pass on traditions and wisdom.
Save your estate from being depleted by court fees. With proper planning, this can be done.
What is an estate?
Your estate is composed of everything you own, including your car, home, bank accounts, furniture and all of your personal property (i.e. jewelry, tools, all your toys, etc.). Your estate will also include your retirement accounts and life insurance.
Estate planning is the process of making a plan that distributes your estate to the people and organizations that you want to receive those assets after you die. In other words, putting together a set of written instructions that dictates who will receive the assets in your estate after you die, what they will receive, and when they will receive them.
Estate Planning is much more than just dividing up your Assets.
It's more than just dividing up your "stuff." When you meet with a lawyer to design an estate plan, they will (should) help you:
- Set down written instructions for what should happen if you become disabled or incapacitated.
- Name temporary and permanent guardians for your children in the event of your death or incapacity.
- Protect your children's inheritance from their own creditors or divorce.
- Put in place the proper insurance to provide for your family if you die, become temporarily disabled, or have an extended illness or injury.
- Map out a strategy to minimize taxes, court costs, and legal fees when the time comes to implement your plan.
- This is just the start. You need a good estate planning attorney to help you navigate it all and make these decisions.
Who should have an Estate Plan?
Here at Cartwright Law, the focus is mainly on helping young families with minor children. It's vitally important that young families put a plan in place to protect their children in the event something were to happen to one or both of their parents. This, however, is a subgroup of all the people who will need estate planning. Honestly, everyone needs an estate plan. If you are reading this, YOU need an estate plan.
What happens if you die without a will in Tennessee?
Every state has a default plan for people who fail to do their own estate planning. They are called "intestate laws." If someone dies without a will, they are said to have died intestate.
In these situations, someone would step forward and file a probate case for the estate of the deceased (also called the "decedent"). They would let the court know that the decedent died without a will. Accordingly, the court would appoint a personal representative of the estate, who would likely be required to post a bond. The personal representative would begin the process of trying to find out what the decedent's assets were, what needs to be accounted for and what should be distributed according to the intestate laws of the decedent's state. In Tennessee, how your property is distributed depends on whether you were married, for how long your were married, and how many heirs (I.E. children) you have. If you have a spouse but no children, your spouse gets everything. If you have children, but no spouse, then your children get everything. If you leave behind a spouse AND children, then they will split up the probate property. The more children you have, the smaller the share for your surviving spouse.
Also, keep in mind that if you leave money to minor children, either through intestate laws or by naming them as beneficiaries on your retirement accounts or life insurance, then the court will oversee those assets until your children turn 18. The court will appoint a guardian to manage those funds on your children's behalf. In addition, if you leave behind minor children without an estate plan that names emergency guardians, your children will be taken into protective custody until a suitable guardian has been named. Because you didn't plan, you would not have any input into who this person would be.
What happens if you become disabled without an estate plan?
Many people think that estate planning is only for planning what will happened if you die. The fact is, it can be much harder for your family if you become incapacitated without a plan in place. For example, if you become incapacitated with no estate planning, you cannot sign off on any transactions that involve your house or your bank accounts. That means your spouse can't cash that joint tax refund you just received, and you can't take out a second mortgage on the house, even if you needed those funds to care for your disabled spouse.
This is because you can only transfer titled property with a signature or a court order. If you become incapacitated, your spouse can't get your signature, so he or she is forced to file an expensive, public, and time-consuming guardianship proceeding to get the court's permission to manage those assets.
Other benefits to proper Estate Planning:
As mentioned above, the clear benefits of proper estate planning are that you will control your estate after you die or become incapacitated. You can name guardians for your children. You can provide your spouse with a mechanism to sell or encumber the marital home if he/she needs the money to pay for your care.
Here are some other benefits to Estate Planning:
- You can keep your assets out of the court system.
- Estate Planning forces you to get your financial house in order and organize all of your relevant financial information into one single file so that your family will have access to it when they need it.
- It provides you with the "peace of mind" that you have made all the important decisions about how your loved ones will be taken care of if something were to happen to you.
- It protects your assets from your children until they are old enough and mature enough to manage their inheritance on their own.
- Estate Planning allows you to keep your affairs private and out of the public record.
- It allows you to appoint someone you know and trust to make health care decisions for you if you become incapacitated and are unable to make your health related decisions on your own.
What are the elements of an effective Tennessee Estate Plan?
We have talked at length about what an estate plan is, who should prepare an estate plan, and what happens if you die or become incapacitated without an estate plan in place. Now let's discuss what a typical estate plan looks like.
When most people think of an estate plan, they think of a "Will." A will is just one component of an effective estate plan. A will is a document that provides a set o written instructions to the Probate Court for how you want your property divided. If you have a will in place, you will not avoid the probate process. Any assets that are titled in your sole name must go through the probate process before they can be passed on to your heirs. The will is just written instructions that tell the probate judge how to divide up your assets.
Generally speaking, any asset that is titled in your sole name will have to pass through the probate process. This includes real estate, bank accounts, cars, etc. Some assets avoid going through probate, including:
- Jointly owned property or bank accounts,
- Bank accounts with a beneficiary designation (payable on death or terminates on death),
- Retirement accounts and life insurance that names a beneficiary.
However, if you forgot to name a beneficiary, or if you name a minor as a beneficiary, then some of these assets may still end up in probate. Furthermore, if you name a minor as beneficiary, then the court is likely to insist on a guardianship to manage those funds until the minor child turns 18.
A Revocable Living Trust
A Revocable Living Trust is a tremendous estate planning tool for individuals and families that want to avoid probate, while at the same time maintaining control of their assets and keeping their affairs private.
A trust is basically a contract between a trustee and a grantor to manage property for a beneficiary. While you are alive, you play all three roles. If something happens to you (either you die or become incapacitated), the trust will have a set of instructions for who should step in to manage your estate as a "successor trustee."
One of the main benefits of a trust-based estate plan is that your assets will remain in your trust long after you die or become disabled. Your assets will either stay in your trust or be distributed into one or more new trusts for the benefit of your heirs.
In addition, if you have a spouse, they can step in and take control of your assets without having to request permission from the court. This saves time and money.
Other Estate Planning Documents You May Need
There are other essential documents to complete an estate plan. Click here to read more about other Estate Planning documents.
When is the best time to make your Estate Plan?
The best time to plan your estate is today. Most of us do not think about death or incapacity, but one of the two will eventually happen to all of us. Leaving your heirs without an estate plan in place could have a devastating effect on your family. In the alternative, by leaving your family with a well thought out and organized estate plan, you will be leaving them with an amazing gift that can last for years to come.
If you have any questions, you may fill out the contact form below or simply call 615.473.1006.