Nashville Probate and Disability Law Journal

Posted by Barbara Moss.

"We gave away our house last week to our two children. We want to be able to qualify for Medicaid without the government getting all our money." That's how my interview with two potential clients started.

Unfortunately, there is a common belief that the way to qualify for Medicaid (TennCare here in Tennessee), is to give away all your property to your children. There are many problems with that approach, and I want to detail a few in this post.

First, TennCare has a five year lookback. If you need to qualify for TennCare 4 years and 11 months after giving away the house (or any other property) for less than its fair market value, you will be disqualified for a number of months calculated by the uncompensated value of the property divided by $4,591 (the average monthly cost of long term care in Tennessee).

Here's an example: If the house was worth $150,000 and you applied for TennCare 4 years and 11 months after giving it away (and you are medically and financially qualified--broke and sick), you would be penalized and would have to pay privately for long term care for 32.7 months.

Even if you suppose that you make 5 years after giving away property before you need to try and qualify for TennCare, there are other drawbacks to this approach.

What if one of your children gets a divorce? What if one of your children has financial reversals and takes bankruptcy, or his or her creditors pursue a lawsuit and get a judgment. The house could be gone.

There are also gift tax complications. My potential clients could each give away $28,000 ($14,000 each) to each child without tax implications. But the value of the house is $150,000. The clients will have to file a form with the IRS next April, IRS form 709, and the extra value of the house over the gift tax exemption will be deducted from the lifetime exemption of $5 million.

There is one final problem, though. The children because they received the home as a gift, won't get a step up in basis. That means, when they sell the house, they'll have to pay tax on the entire gain from the time their parents bought the house until they sold it. If they acquired the house on their parents' deaths, they would get the stepped up basis to the house's fair market value at that time.

It turns out that one of my potential clients handled his mother's estate years ago by being given all the property and then later dividing it up with his siblings after her death. I had to tell him, sadly, that things have changed.

The lesson is this: before you give away property to your children in an effort to someday qualify for TennCare, consult an elder law attorney. There are better ways to deal with your assets.

Continue reading "Giving Away the House" »

Posted by Barbara Moss.

My mother wanted to live at home as long as possible. Fortunately for her, when that was no longer possible, she was able to pay some of the capital from the sale of her home for a spot in an assisted living facility that also provided memory care and, ultimately, nursing home care. She was lucky.

For many seniors, finding the care they need in the setting they want can be expensive and difficult.

That problem will only get worse in future years. The number of Americans over 65 will double to 80 million people in the next 30 years. The fastest growing cohort are people 85 and older. By 2020, there will be about 6.6 million Americans in that age bracket, when the rate of debilitating ailments begins to skyrocket.

The problem is usually measured by the need for help in one or more "activities of daily living." According to TennCare, the Tennessee version of Medicaid, these are self-care tasks that enable a person to live independently in his or her own home, such as:
• Personal hygiene and grooming;
• Dressing and undressing;
• Feeding oneself;
• Transfers such to and from bed to wheelchair or to and from wheelchair to toilet;
• Bowel and bladder management; and
• Ambulation (walking without a wheelchair, walker, or cane).

If seniors are having difficulty with these activities of daily living (or others, such as medication management) they or their families may feel helpless to get needs met. Fortunately, there are many alternatives.

In some instances, there are volunteer organizations that provide services. In Nashville, for example, the Meals on Wheels program run by FiftyForward provides nutritious weekday, weekend and holiday meals on a sliding fee scale. FiftyForward can also provide care management, adult day services, and other contracted services.

Our area also has a number of very fine private care management organizations. These companies provide a range of services and are run by some very compassionate and capable people.

Long term care insurance can help provide services to maintain the health of their policy holders who want to remain at home. The level of services provided will depend on the language of the insurance contract.

The TennCare Choices program can also provide services to help seniors remain at home, under the acronym of HCBS, or "Home and Community Based Services." There are three levels of the TennCare program, which go by the name of "Choices." Level one is for seniors and other disabled people in nursing homes. Level two is for seniors and other disabled persons who receive home care but would qualify for nursing home care. Level three is for those "at risk" for nursing facility care.

To qualify for these programs seniors must meet guidelines pertaining to their health needs and also must qualify based on income and assets. Families can get assistance in meeting those income and asset criteria by consulting with attorneys who specialize in Elder Law.

Continue reading "Living Independently in Old Age" »

Posted by Barbara Moss.

As I've written in a prior post (December 19, 2012), Medicare pays only a limited amount toward nursing home care and then only when there has been a 3-day hospital admission first.

People who enter a nursing home usually pay for it in one of three ways; (1) with their own resources, (2) with long term care insurance, or (3) with government assistance--Medicaid, called "TennCare" here in Tennessee. Generally only the well-off can pay for an extended period of nursing home care with private resources, because nursing home care can be very expensive. Nursing home care averages about $5,000 a month in Tennessee.

Nevertheless, most people start off by paying for nursing home care with their money and savings.

Medicaid is a joint program of the Federal and State governments that pays for nursing home care for people with limited income and resources. Tennessee is an "income cap" state, and residents theoretically cannot qualify for TennCare if they receive income of more than $2,094 per month. Furthermore, an individual must have $2,000 in assets or less to qualify.

Like all government programs, however, TennCare is complicated. There are exempt assets, ways to legally transfer or purchase some assets, and ways to limit income by using a "Miller Trust." Use of these legal strategies and others can help people qualify for TennCare sooner. You may not have to spend all of your money (except $2,000) on the nursing home before you can qualify.

There is a myth that the solution is to give your assets away, perhaps to your children. Do not take this path without consulting an attorney! TennCare has a 60 month "look back" period during which transfers for less than market value can cause you to be penalized in your ability to qualify.

Nationally, Medicaid pays for about 7 of every 10 nursing home patients. If you find that you must use TennCare to pay for nursing home care for yourself or a family member, you will not be alone.

Continue reading "Paying for Nursing Home Care" »

Posted by Barbara Moss.

In a study reported in the European Journal of Ageing, researchers took a look at several aspects of loneliness among the elderly population. The results were rather surprising.

First, the researchers looked at the popular belief that older citizens are more lonely than others. While the image in the public is that the elderly as a group are overwhelmingly lonely, the facts do not bear that image out. Loneliness is common only among the "very old," aged 80 and up. Incidentally, it is also common among the age group of 15- to 24-year-olds.

The researchers also tried to discover whether older people in "individualistic" societies are more lonely than those in societies that have a stronger emphasis on family life. The United States, of course, falls on the individualistic end of the spectrum. The researchers found no correlation of increased loneliness in individualistic societies.

Here's the web address for this study: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2693783/

In an even more recent study, published in the Journal of Neurology Neurosurgery & Psychiatry, Dutch researchers looked at feelings of loneliness and the incidence of dementia. The study found that after adjusting for other relevant factors like age, feeling lonely raised the risk of dementia by 64%.

Actual loneliness, for example, living alone, is not associated with increased risk of dementia.

The study points out that feelings of loneliness may be the result of decreased cognition. In other words, dementia may increase feelings of loneliness.

Here's a discussion of the study: http://healthland.time.com/2012/12/11/loneliness-not-living-alone-linked-to-dementia/

Continue reading "Loneliness and Dementia in the Elderly " »

Posted by Barbara Moss.

Many consumers are unaware of the limitation on Medicare payments for a skilled nursing facility. Often, they haven't faced the question until they, or family members, are in a crisis situation.

Acute Hospital Care.
If you or a loved one is hospitalized for acute 24-hour medical, rehab, nursing, multi-disciplinary care, Medicare Part A pays 100% after $1,184 (all numbers in this article are for 2013) for the hospital costs in a dual occupancy room as well as medications, treatments and supplies. If the doctor orders a private room as a medical necessity, Medicare will pay for that also. The benefit period for this level of payment is 60 days.

For days 61 through 90, Medicare will pay 100% after a $296 per day copayment. This is paid for each "benefit period."

For days 91 through 150, Medicare pays 100% after a $592 per day copayment. These are "lifetime reserve days, 60 of which are non-renewable. In other words, you will only get this payment once, regardless whether you need more than 90 days of hospitalization in the future.

Nursing Home Care.
Payment of any stay in a facility for skilled nursing care and rehabilitation is dependent on a patient having a prior 3-day stay in an acute care hospital. Admission for "observation" does not count. The 3-day hospitalization has to be within 30 days of prior to the doctor's orders for admission into a facility for skilled nursing care and rehabilitation.

Then Medicare will pay 100% for the first 20 days. For days 21-100, Medicare sill pay 100% over $144.50 per day. For days 101 an beyond, Medicare pays nothing.

Home Health Care.
For medically necessary skilled home care after a hospital stay, Medicare will pay 100% if the services have been ordered by the doctor and are necessary to benefit the patient.

Medically Necessary Durable Medical Equipment.
Medicare will pay for 80%, leaving the patient liable for 20% of the cost of this equipment.

Hospice Services.
Medicare will pay for doctor prescribed pain control and support if a patient has been diagnosed as terminally ill. The doctor must certify that there is a need for the terminal care. There are cost limits on inpatient respite care and outpatient drugs.

All in all, the one that shocks many consumers is the limit on nursing home care. After 100 days, the patient is left to fund the entire cost, unless the patient can qualify for Medicaid (called TennCare here in Tennessee).

Continue reading "How Much Does Medicare Pay for a Nursing Home?" »

Posted by Barbara Moss.

Ed and Samantha have been married for 50 years. He is 77 and she is 75. They have worked hard all their lives, own a home and have about $100,000 in savings. They have two grown children who are doing well, one of whom lives close by. Last month, Ed had a stroke. The doctors have told Samantha that Ed can no longer live at home and should consider a skilled nursing facility, i.e., a nursing home. What should they do?

The monthly cost for nursing home care in Nashville, Tennessee is $5,000 to $7,000. For assisted living, the average monthly cost is about $4,000. If Ed goes into a nursing home, his and Samantha's liquid assets could be gone in less than 2 years.

Ed and Samantha know very little about paying for long term care. They always thought Medicare would cover their medical costs after they turned 65. Their friends are busily giving them advice. Some friends have said that they need to spend everything except $2,000 before Medicaid ("TennCare" in Tennessee) will pay for Ed's nursing home care. Other friends are telling Ed and Samantha to give everything away to their children NOW.

In fact "now" is the right time to consult with a lawyer specializing in Elder Law. First, it's time to do some basic planning if it hasn't already been done. Both Ed and Samantha need wills if they don't already have them. Each also needs to select an "attorney-in-fact," or someone who has the power to make financial decisions under a document called a power of attorney. Each needs a durable health care power of attorney so that an agent will be able to make health care decisions if either becomes unable. A living will or advance directive for health care planning can help Ed and Samantha make sure that their wishes about end of life issues, such as being kept alive by a ventilator or by tube feedings, is known to their family members and can be honored.

Next, Ed and Samantha need to be guided in planning for how they will pay for a nursing home and at the same time maintain a good standard of living for Samantha. Fortunately, there are laws that will provide minimum standards of income to meet Samantha's expenses and allocate the assets between them in a way that is fair.

It is not a good idea to give everything away. TennCare will look back 60 months from the time of any application and will disqualify Ed from receiving benefit if he has transferred assets without receiving fair market value. The length of the disqualification is based upon the Tennessee's computation of the average cost of nursing home care. Right now, if Ed were to give away the entire $100,000 in savings, he would be disqualified for 20 months from receiving TennCare to cover the nursing home costs.

Continue reading "When Should Consumers Consult with a Lawyer Specializing in Elder Law?" »

Posted by Barbara Moss.

Alzheimer's Disease is the most common type of dementia, accounting for between 60 and 80 percent of all cases. Some of the early symptoms are difficulty in remembering names and recent events, apathy and depression. Later symptoms can include confusion, behavior changes, incontinence, and difficulty speaking, walking and swallowing.

Although Alzheimer's Disease was identified almost 100 years ago, we have only seen intensive attention and research devoted to it in the last 30 years. It may be that we are living longer, and thus seeing more of this disease.

In fact, age is the greatest risk factor for the disease. Most Americans who have Alzheimer's are more than 65 years old. A family history of the disease, as well as some types of head trauma, are also risk factors.

An estimated 5.4 million Americans of all ages have Alzheimer's. One in eight people (13 percent) 65 years and older have the disease. As age increases, so does the incidence. At 85 and older nearly half (43 percent) have Alzheimer's.

Although most families try to keep their loved ones with Alzheimer's at home as long as possible, the majority will end up in nursing homes as their condition progresses.

The cost of nursing home care can be devastating to a family. Fortunately, there are ways in which Elder Law attorneys can help families prevent some of these consequences, especially if the person entering the nursing home is married. In 1988, the United States Congress passed the Anti-Spousal Impoverishment Act. By using the provisions of that Act, an attorney can make sure that assets and income are divided between the "community spouse," the one still living at home, and the spouse in the nursing home.

A prior post discusses more of the details of this Act. But in this post, I wanted to bring to readers' attention the emotional impact of Alzheimer's Disease by passing along a poem sent to me by a colleague.

DEAR READER
By Rita Mae Reese

You have forgotten it all.
You have forgotten your name,
where you lived, who you
loved, why.
I am simply
your nurse, terse and unlovely
I point to things
and remind you what they are:
chair, book, daughter, soup.

And when we are alone
I tell you what lies
in each direction: This way
is death, and this way, after
a longer walk, is death,
and that way is death,
but you won't see it
until it is right
in front of you.

Once after
your niece had been to visit you
and I said something about
how you must love her
or she must love you
or something useless like that,
you gripped my forearm
in your terrible swift hand
and said, she is
everything--you gave
me a shake--everything
to me.
And then you fell
back into the well. Deep
in the well of everything. And I
stand at the edge and call:
chair, book, daughter, soup.

Continue reading "The Toll of Alzheimer's Disease" »

Posted by Barbara Moss.

"Planning is bringing the future into the present so that you can do something about it now."
Alan Lakein, American author and Time Management Expert

We plan to go on vacation. We plan to have dinner with friends. But when it comes to planning for how we will be taken care of as we advance in age, many of us prefer not to think about it, believing it will somehow all work out. Unfortunately, when it comes to long term care planning, including finding the appropriate care and figuring out how to pay for it, those who fail to plan are clearly the ones who risk losing the most.

Consider the two scenarios below that contrast the different outcomes of planning early and choosing the "wait and see" approach for long term care.

The Facts
Hank is 72 and Ellen is 69. They have been retired for several years and have started traveling a few times a year to visit their children and grandchildren who live in nearby states. During a recent visit, their oldest child asked them whether they had made any plans in the event one of them suddenly got sick. Hank and Ellen had not thought much about this since both of them were in good health. However, they agreed to seek some advice upon returning home to see what their options were.

Hank and Ellen own a home that they have lived in since their marriage 45 years ago, and they have checking, savings and CD accounts that total $325,000. They both worked most of their adult lives, carefully watching their expenses and never spending money on extravagant items they didn't feel they needed.

Scenario #1 - Hank and Ellen planning ahead. Hank and Ellen spoke with an elder law attorney, as they knew they should update their will and their powers of attorney. While there, they were surprised to learn that they could actually plan now to avoid running out of money in the future should they need long term care either at home or in a facility. With the help of their elder law attorney, they placed $200,000 and their home into an irrevocable trust, and named their children as beneficiaries of the trust. If needed, their children would be able to take a distribution from the irrevocable trust rather than using their own money for Hank and Ellen's needs.

The remaining $125,000 would be kept in a revocable trust that Hank and Ellen would use for their living and travel expenses. Ellen would apply for a long term care insurance policy to provide further protection for them should her health fail (Hank had applied previously but was denied). The $200,000 placed into the irrevocable trust would not be counted against them after 5 years, should either of them need long term care and the assistance of state benefits to pay for it.

Unfortunately, six years later Hank had a severe stroke and ended up in a nursing home unable to use his right side arm or leg. Ellen tried caring for him at home but was simply unable to. Ellen went back to see the elder law attorney for help. Because they had planned ahead and had set up an irrevocable trust, Ellen was able to keep all of the remaining cash assets in their revocable trust, and Hank was able to qualify immediately for state Medicaid benefits. The irrevocable trust (which had now grown to $215,000) remained in place but did not count against Hank since more than 5 years had passed and neither Hank nor Ellen had any direct access to the trust assets.

Ellen was incredibly relieved to know that she did not have to worry about paying for Hank's care and could instead focus on visiting him and providing as much support as possible to him. Although Ellen was not able to obtain long term care insurance, she has piece of mind knowing their children continue to manage the irrevocable trust and are ready to help both Ellen and Hank as needed.

Scenario #2 - Hank and Ellen without planning ahead. Let's assume Hank and Ellen did not plan ahead. When Hank had a stroke at age 78, the couple had $300,000 in checking, savings and CDs. Under the Medicaid regulations in place at the time, Ellen was able to keep $110,00 of the assets, but most of the remaining assets had to be used for Hank's care, leaving only $90,000 that was transferred to the children (or to an irrevocable trust) and thus protected from Medicaid. While their home would be protected since Ellen was still living there, if she were to become ill the home could be subject to a lien by Medicaid.

It took nearly two years to get Hank qualified for Medicaid, and the process was incredibly stressful for Ellen and her children. Furthermore, no planning has been done for Ellen and if her health fails, their remaining assets are at risk.

What If Hank Was Not Married?
Let's assume Hank was not married, but had the same assets. If Hank planned early, all of the assets he put into an irrevocable trust (including his home) would be protected. Any assets left outside the trust could be transferred or turned into an income stream to pay for his care, should his health fail and he would need to qualify for Medicaid. Just as above, the Medicaid application process would go smoothly and quickly. In addition, an enhanced power of attorney would avoid the need for a guardianship in the event Hank was unable to make the transfers or sign the Medicaid application himself.

If Hank did not plan ahead, more than half of his liquid assets may have had to be used in order to protect Hank's home, depending on the Medicaid rules in effect at the time. This would leave only $50,000 to transfer to the children (or to an irrevocable trust). And, if Hank did not have capacity to make any transfers or to establish an irrevocable trust, a guardianship proceeding would have to be initiated before any transfers could be made. Furthermore, the guardianship court would have to grant permission for such transfers to be made.

Conclusion
The scenarios above have highlighted the importance of seniors and their loved ones planning early for the possibility of needing long term care. There are not only financial benefits to doing so, but also numerous non-financial benefits, including reduced stress on the family and peace of mind knowing that the family's needs are taken care of regardless of any health care crisis that may occur.

Continue reading "The Importance of Planning" »

Posted by Barbara Moss.

I have become very interested and knowledgeable in the area of Elder Law. So what exactly is that?

Elder Law is defined by the clients who are served, generally, elderly and disabled persons. Elder Law typically includes the following subject areas: Medicare appeals, Medicaid (called TennCare here in Tennessee) planning and appeals, veterans' pension planning, special needs planning, conservatorships, social security disability, estate planning, and elder abuse.

The reader may wonder why the area is called "Elder Law," since it includes disabled persons. The reason is that the majority (but not all) of the persons with issues in these areas are 65 and older.

For example, Medicare is a program available primarily to people 65 years of age or older. But it is also available to people who have been found disabled for the purposes of Social Security Disability Insurance. About 13 percent of the population served by Medicare is under 65 and disabled.

Similarly, since Medicare does not cover long term care, a large portion of Medicaid benefits go to nursing home care. In 2009, Medicaid paid for 40 percent of all nursing home expenses in the United States. All nursing home care is by definition administered to the disabled, since well people of all ages prefer to live in their homes (and cannot qualify for Medicaid-reimbursed nursing home care). Among seniors generally, however, 15.4 percent depend on Medicaid.

Both Medicare and Medicaid are very complicated programs with complicated regulations. Conservatorships, social security disability, veterans' benefits, etc, are equally complicated.

But the need arises not just from the issues facing senior citizens, but also from the demographics themselves. There is a greater proportion of elderly persons on our planet than ever before.

In the United States, the 2010 Census showed the senior population increasing faster than younger groups. The nations median age rose from 35.3 in 2000 to 37.2 in 2010. Seven states have a median age 40 or older.

This rapid aging is due to the bubble in the population created by the "Baby Boom." Each year, more than 3.5 million baby boomers turn 55.

Finally, and sadly, although many seniors are living more healthy lives than ever, the incidence of Alzheimer's disease will create legal issues for single and married seniors. Millions of Americans have Alzheimer's and other forms of dementia.

One in eight people 65 years and older has Alzheimer's disease. Nearly half of those over 85 have the disease.

Because of these statistics, seniors and their families have legal issues that they need to address. Everyone should consider the need for a power of attorney to handle financial matters if he or she becomes disabled. Each person should also execute a durable power of attorney for health care decisions and/or a living will.

Wills, of course, are also important to make sure that a senior's assets will be distributed at death according to his or her wishes.

Continue reading "What is Elder Law?" »

Posted by Barbara Moss.

A person who makes a will in Tennessee, the "testator," must have a certain mental capacity or the will is void. How do courts in Tennessee decide whether the testator had sufficient soundness of mind if someone challenges a will on that basis?

It's important to realize that a testator is measured by a different yardstick for capacity to make a will than if a court were to measure capacity to engage in other types of business transactions.

In order to make a will, a testator must know and understand 1) the nature and effect of his or her act (in making the will), 2) the property he or she possesses, and 3) the manner in which his or her property will be distributed under the will. In other words, the testator needs to understand the effect and consequences of his or her actions in making the will.

If a testator has properly executed a will in front of witnesses, there will be a presumption that he or she had the capacity to make the will. It will be up to the person challenging the will to prove lack of capacity by a "preponderance of the evidence." The person will have to prove that more likely than not the testator did not have the capacity to make the will.

What types of evidence will be considered in deciding whether the testator had the capacity to make a will? Factors such as physical weakness, disease, old age, failing perception, and failing memory are all admissible. Lay witnesses can give their opinions about soundness of mind if they base those opinions on specific conversations, appearance, conduct or other particular facts from which the testator's state of mind can be judged.

The mental condition of the testator at the time the will was executed is the issue. At the same time, mental condition before and after signing the will can be relevant if not too remote in time.

In one Tennessee case, a psychiatrist was allowed to testify based on an interview and neuropsychiatric testing six months before the will was signed. The psychiatrist, however, was able to specifically address the testator's capacity on the date of the execution of the will and explain how and why the psychiatrist was able to form an opinion about the testator's capacity on the date the will was executed.

A will is more likely to be challenged if it makes uneven distributions of property to family members. There can be other warning signs, too, such as failing health, failing mental capacity, and individuals in second or third marriages who are making unequal dispositions to children.

In those situations, getting psychological examination for a testator and videotaping the signing of a will can make a will less likely to be challenged.

Continue reading "What is the Mental Capacity Required to Make a Will in Tennessee?" »

Posted by Barbara Moss.

If you've been thinking about what would happen if you were incapacitated, here are some reasons that the creation of a power of attorney could really benefit you and your family.

1) Let's you choose who will make financial decisions if you are incapacitated. If you don't have a power of attorney (POA) and you become incapacitated, you have lost your power to choose who will make your financial decisions.

2) Avoids an expensive proceeding in court. If you do not have a POA, and you become incapacitated, someone will be required to go through the expensive and time-consuming alternative of having a conservator appointed for you. In Tennessee, the process requires--at a minimum--a lawyer, an affidavit from a treating physician that you have seen in the last 90 days, the appointment of another lawyer (the guardian-ad-litem), and a hearing before the probate judge to get someone appointed who can make decisions about paying your bills, handling your property, etc.

3) Gives you and your family members an opportunity to discuss your wishes and your property. At the very least, I recommend that clients discuss with their families who is being chosen as the attorney-in-fact and why. In every family there is potential for hurt feelings. Why not talk to your family now and explain who you want to handle your affairs and tell them your reasoning process? You can be the one telling a son or a daughter, "I really do love you, but I feel that you are already overwhelmed with the pressures of (fill in the blank)." You can also discuss with the attorney-in-fact any priorities you might have for how you want your assets handled and your bills paid.

4) Allows for comprehensive planning. We don't know what will happen as we age. By drafting the appropriate documents now, we can plan for many eventualities.

5) Answers questions about your intent. A financial POA coupled with a Durable Power of Attorney for Health Care will let your loved ones know answers to questions that might be very important. For example, do you want to be kept alive in a vegetative state? How long?

6) Prevents delays in planning that could protect assets. Sometimes there are assets that can be protected if the proper steps are taken. A good lawyer will find out if those steps should be taken now, or soon, during the process of interviewing you and drafting a POA.

7) Protects the attorney-in-fact from claims of undue influence or abuse. If you wait to create the POA until you are already well down the road to incapacity, there will be more chance of court challenges to the POA.

8) Provides peace of mind for you and your family members. Pretending that there is no chance you will ever be incapacitated is not a strategy that is likely to ease your mind about the future, nor will it bring comfort to your family. You and your family deserve to know that appropriate steps have been taken to plan for the future.

Continue reading "Reasons to Have a Power of Attorney" »

Posted by Barbara Moss.

Approximately 55 per cent of all adult Americans die without a will. In the United States, about $100 million a week goes through probate courts for decedents who died "intestate."

When a person dies without a will, particularly with a taxable estate or children from more than one marriage, it can cause substantial heartache, legal fees, and avoidable taxes.

For those who don't have wills, state law determines who gets the assets.

Some assets are held in common with another person with a right of "survivorship." Those assets pass automatically at death to the other person, regardless of any will. Assets most commonly held in this form are bank accounts and real property, especially homes owned by husbands and wives.

Any asset that passes by beneficiary designation does not require a will. The most common form of this asset is life insurance. Also, some pension benefits will be passed along to a designated beneficiary, regardless of the terms of any will.

Almost all other assets--real property, cash, and personal property--are distributed by a method set out in Tennessee statutes governing "intestate succession," when the owner dies without a will.

So, who needs a will? Anyone who owns property with no beneficiary or who has children young enough to need a guardian. Someone who has a complicated family situation, such as children by a former spouse, or a taxable estate (in Tennessee, any estate over one million dollars), especially needs a will. Steve McNair's heirs, for example, would have avoided paying substantial taxes to the state and federal government if he had signed a will.

If the estate is not large or the planning is not complicated, the cost of a will is not prohibitive. Although I rarely encourage people to "shop around" for lawyers, you might check with respected friends and obtain two or more names of lawyers who practice in this area. If your will is truly simple, you may be able to compare prices to some extent.

If you can afford to pay a lawyer to draft a will, I heartily recommend that you do so. It is so much cheaper than the lawyers' fees and hurt feelings that can result from lack of a will.

Recognizing, however, that some people simply can't afford a will, however, leads me to explain what lawyers call "holographic," or handwritten wills.

A valid, holographic will must be written entirely in your own handwriting and be signed by you, as the testator. I sometimes see "fill in the blank" wills, partially typewritten and partially handwritten. This will not fly in Tennessee.

Your will should deal with all of your property. Put a heading on the paper, such as "Last Will of (your name)," and date it. If you have a prior will, tear it up.

When a handwritten will is presented for probate, two people who take no property under your will (such as your siblings or your long-time friends) must state under oath that they each recognize your handwriting and your signature and that the paper presented to the court was written entirely by you and signed by you. Make sure that at least two people exist who know your handwriting and signature and will be able to state under oath they recognize your handwriting and signature on the handwritten paper designated as your will.

Keep the will in a safe place. One final word of advice: talk to your family members about your wishes and your will, and give them a copy, if at all possible. Although surprises at the "reading of the will" make for good television drama, they are not good for family relationships.

Continue reading "Handwritten Wills in Tennessee" »

Posted by Barbara Moss.

A caller recently asked whether I recommend a revocable trust, sometimes called a "living trust," as a substitute for a will to transfer assets upon death.

Living trusts have often been promoted as a way to avoid probate. Since probate in Tennessee is generally easy and inexpensive, however, it pays to take a closer look at living trusts as opposed to wills to see which would really be a better way to dispose of assets after your death.

A trust is a legal arrangement governing how assets are managed and distributed. It is set up with a trust agreement in which a Grantor transfers title to assets to a Trustee to manage on behalf of a Beneficiary. In a living trust, the Grantor is typically both the Trustee and the Beneficiary, at least until the Grantor's death. The Grantor may terminate the trust or change the terms of the trust at any time. At the Grantor's death, the trust agreement names a new Trustee, who then distributes the assets according to the terms of the trust.

A living trust does not save death taxes. The estate tax rules are the same regardless whether the assets are transferred under a will or a trust agreement.

A living trust also does not shield assets from creditors. In fact, when a will is probated, a process for notifying creditors results in barring any creditors' claims that are not filed within four months. There is no such time bar when there is a living trust.

To avoid probate, the Grantor cannot leave any property titled solely in his or her name, rather than titled to the trustee of the living trust. This includes assets that the Grantor acquires after the trust is set up. If any property is not transferred to the trust, the Grantor's estate will likely have to be probated anyway.

The Grantor can also execute a will that "pours over" assets into the trust at his or her death. This will, however, has to be probated. So, the estates of many Grantors of living trusts do not really "avoid probate."

Living trusts are private and there is no public record of the estate assets or beneficiaries. On the other hand, there is no court supervision to protect the rights of the beneficiaries, as occurs in the probate process.

Creating a living trust and transferring assets to the trust may cost as much or more than having a will drafted and admitted to probate.

I have given a very cursory treatment of living trusts here. There are times when living trusts make sense, particularly if you own real property in more than one state or have substantial assets.

Be cautious about agreeing to a living trust instead of a will and be sure to consult a lawyer or tax advisor.

Living trusts have been promoted to such a degree that there is a specific provision of the Tennessee Consumer Protection Act that covers advertisements about workshops and seminars that market living trusts. A number of things must be disclosed in the advertisement, most importantly the information that an individual, before creating a transfer by living trust, should get advice from a lawyer, accountant or other tax professional about the true tax impact of a living trust and to ensure that assets are properly transferred to the trust.

Continue reading "Are Revocable Trusts Better than Wills in Tennessee?" »

Posted by Barbara Moss.

A surviving spouse in Tennessee has the right to take an "elective share" in two situations. One is if the deceased spouse (the "decedent") died without a will ("intestate") and the surviving spouse wants a greater share of the estate than that provided by the law of intestacy (which sets out who gets what when a person dies without a will). In the other case, the surviving spouse wants more than what the will provides for him or her.

What is the elective share?

Under Tennessee law, if the surviving spouse and decedent were married less than three years, the elective share is 10% of the net estate; three but less than 6 years, 20%; 6 but less than 9 years, 30%; and 9 or more years, 40%.

Electing against an intestate share

Under the laws of intestacy, a surviving spouse will get at least one-third of the decedent's assets, half if there is only one child, and all if there are no children. Electing a different share, therefore, would only be a consideration if there are at least two children (spouse is entitled to one-third) and the parties were married 9 years or more (spouse is entitled to 40%).

There are also differences in calculating the estate to be distributed under the elective share law and the laws of intestacy. The estate divided up under intestacy is the net assets after the payment of "debts and charges." Under the elective share law, the surviving spouse gets a percentage of the net estate, which is defined as all real and personal property less secured debt realized from the collateral, and less any award of homestead, exempt property and a year's support. The elective share amount is not reduced by unsecured debt or generally by any estate taxes.

Electing against a will

Unless the parties entered into a prenuptial agreement that specifically prevents one spouse from electing against a will, any surviving spouse may ask the court for an elective share. The value of anything that the surviving spouse has already received outside the will, such as real property or bank accounts, will directly reduce the amount payable to the surviving spouse.

Time for and manner for electing a share

The surviving spouse generally has nine months to ask the court for an elective share unless property devised or bequeathed by the will is involved in litigation so that the surviving spouse can't really calculate what is in his or her pest interest. The surviving spouse files a petition with the court to be allocated an elective share.

Necessity for good information

A surviving spouse and his or her lawyer may need to make some complicated calculations to determine whether an elective share is in the surviving spouse's best interest. Accordingly, the personal representative of the estate has an affirmative duty to provide the spouse with information about the state and condition of the decedent's estate.

Continue reading "The Right of a Spouse to Take an Elective Share under Tennessee Probate Law" »

Authored by Barbara Moss.

In Tennessee, there are several provisions of the law that can provide benefits during the probate process to the spouse and minor children of someone who has died ("the decedent").

Specific Property

The surviving spouse of someone who dies without a will, or a surviving spouse who "elects" against a will (more about that below) is entitled to receive from the estate the following property having a combined value of not more than $50,000: 1) tangible personal property at the principal residence of the decedent which is not used primarily in a trade or business or for investment purposes; 2) a vehicle not used in a trade or business, and 3) growing crops and farm implements. If there is no surviving spouse, but there are minor children, the custodian of the children is entitled to the property.

The surviving spouse or custodian of the minor children applies to the personal representative for the property. The property is available to spouse or children free from any claims against the estate.

Support Allowance

The surviving spouse of someone who dies without a will, or a surviving spouse who "elects" against a will, or unmarried minor children can receive a reasonable amount of money for a year's support. The court can consider the totality of the circumstances in making this award including what other assets are going to pass to the spouse. Again, this amount is free from the claims of creditors.

Unpaid Wages

If the decedent did not designate a beneficiary, the surviving spouse or surviving children can receive up to $10,000 of unpaid wages from the employer and pay any excess to the personal representative of the estate.

Homestead

The surviving spouse or minor children can apply for a "homestead" with a value of $5,000. If the real estate cannot be divided so that a $5,000 share can be set apart (and, in this day and age, the ability to set aside a $5,000 parcel would be highly unusual), the court can order payment of $5,000 in cash or other personal property outright.

Elective Share

The surviving spouse of someone who dies without a will, or the surviving spouse who "elects" against a decedent's will is entitled to receive a percentage of the net estate based upon the length of the marriage. If the spouse and decedent were married less than 3 years, the share is 10%; 3 but less than 6 years, 20%; 6 but less than 9 years, 30%; and 9 years or more, 40%. The net estate includes real and personal property less secured debts, funeral and administration expenses, exempt property, homestead allowance and a year's support (as discussed above). The right to receive an elective share may be altered if there was a prenuptial agreement sighed by the spouse and the decedent.

This election must be made within 9 months of the date of death and the personal representative of the estate has an obligation to disclose fully the assets and debts of the estate.

Continue reading "Supporting a Spouse and Minor Children During Probate" »