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July 2013


Changes to Tennessee Conservatorship Law


Tennessee’s conservatorship law will be modified effective July 1, 2013. The new law requires more court supervision in the establishment and administration of a conservatorship as well as additional notice requirements and involvement of additional attorneys in the establishment of a conservatorship.

A guardian ad litem must be appointed in all conservatorship cases unless the respondent is represented by an attorney or the Court appoints an attorney ad litem. The guardian ad litem is required to investigate whether a conservatorship is needed and who should serve as conservator but is not an advocate for the respondent. If the conservatorship is contested, the Court will also appoint an attorney ad litem.

The new law has also altered the time frame in which a conservator has to file anaccounting of the respondent’s assets and expenses. The revision now requires the first accounting to be filed with the Clerk within thirty (30) days following the six (6) month anniversary of the appointment, i.e. the date the Court granted the petition not the anniversary of the date of the filing of the petition and then annually thereafter. However, in certain circumstances, the Court still has the authority to excuse the accounting requirement.

Specific safeguards and notice requirements are now required for emergency conservatorships before a full hearing can be conducted. Reasonable notice of the hearing on the petition must be given to the respondent, except that an emergency conservator may be appointed without notice, if the court determines that the he or she will be substantially harmed before a hearing on the appointment can be held. If the court appoints an emergency conservator without notice, the respondent must be given notice of the appointment within forty eight (48) hours after the appointment and the court must hold a hearing within five (5) days after the appointment.

Healthcare providers are allowed to seek an “expedited limited healthcare fiduciary” in cases where a patient has no one willing to act on his or her behalf and use the granted authority to discharge, transfer or admit the patient to another healthcare facility and make certain financial arrangements on their behalf.

Third parties such as financial institutions and healthcare providers will no longer be able to rely upon Letters of Conservatorship for a blanket authorization of all transactions, health care decisions etc. The specific powers granted to the conservator must be specified on the Letters of Conservatorship or a certified copy of the Court Order appointing the Conservator must be attached to the Letters of Conservatorship.

The new law provides additional safeguards to the conservatorship process but will also increase the administrative duties and costs required. Further it will be more difficult to obtain an emergency conservatorship thereby delaying the ability of families to assist their loved ones in the event of incapacity. The necessity of a conservatorship can often be avoided by planning ahead with durable financial and health care powers of attorney as well as living trusts. Please contact our office if you have any questions regarding the changes to the conservatorship law or planning for incapacity without the need for a conservatorship.

March 2013

How To Leave Assets To Minor Children

Every parent wants to make sure their children are provided for in the event something happens to them while the children are still minors. Grandparents, aunts, uncles and other relatives often want to leave some of their assets to young children, too. But good intentions and poor planning often have unintended results.

For example, many parents think if they name a guardian for their minor children in their wills and something happens to them, the named person will automatically be able to use the inheritance to take care of the children. But that's not what happens. When the will is probated, the court will appoint a guardian to raise the child; usually this is the person named by the parents. But the court, not the guardian, will control the inheritance until the child reaches legal age (18 or 21). At that time, the child will receive the entire inheritance. Most parents would prefer that their children inherit at a later age, but with a simple will, you have no choice; once the child reaches the age of majority, the court must distribute the entire inheritance in one lump sum.

A court guardianship for a minor child is very similar to one for an incompetent adult. Things move slowly and can become very expensive. Every expense must be documented, audited and approved by the court, and an attorney will need to represent the child. All of these expenses are paid from the inheritance, and because the court must do its best to treat everyone equally under the law, it is difficult to make exceptions for each child's unique needs.

Quite often children inherit money, real estate, stocks, CDs and other investments from grandparents and other relatives. If the child is still a minor when this person dies, the court will usually get involved, especially if the inheritance is significant. That's because minor children can be on a title, but they cannot conduct business in their own names. So as soon as the owner's signature is required to sell, refinance or transact other business, the court will have to get involved to protect the child's interests.

Sometimes a custodial account is established for a minor child under the Uniform Transfer to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). These are usually established through a bank and a custodian is named to manage the funds. But if the amount is significant (say, $10,000 or more), court approval may be required. In any event, the child will still receive the full amount at legal age.

A better option is to set up a children's trust in a will. This would let you name someone to manage the inheritance instead of the court. You can also decide when the children will inherit. But the trust cannot be funded until the will has been probated, and that can take precious time and could reduce the assets. If you become incapacitated, this trust does not go into effect...because your will cannot go into effect until after you die.

Another option is a revocable living trust, the preferred option for many parents and grandparents. The person(s) you select, not the court, will be able to manage the inheritance for your minor children or grandchildren until they reach the age(s) you want them to inherit--even if you become incapacitated. Each child's needs and circumstances can be accommodated, just as you would do. And assets that remain in the trust are protected from the courts, irresponsible spending and creditors (even divorce proceedings).



March 2013

How To Leave Assets To Adult Children

When considering how to leave assets to adult children, the first step is to decide how much each one should receive. Most parents want to treat their children fairly, but this doesn't necessarily mean they should receive equal shares of the estate. For example, it may be desirable to give more to a child who is a teacher than to one who has a successful business, or to compensate a child who has been a primary caregiver.
Some parents worry about leaving too much money to their children. They want their children to have enough to do whatever they wish, but not so much that they will be lazy and unproductive. So, instead of giving everything to their children, some parents leave more to grandchildren and future generations through a trust, and/or make a generous charitable contribution.
When deciding how or when adult children are to receive their inheritances, consider these options.
Option 1: Give Some Now
Those who can afford to give their children or grandchildren some of their inheritance now will experience the joy of seeing the results. Money given now can help a child buy a house, start a business, be a stay-at-home parent, or send the grandchildren to college--milestones that may not have happened without this help. It also provides insight into how a child might handle a larger inheritance.
Option 2: Lump Sum
If the children are responsible adults, a lump sum distribution may seem like a good choice--especially if they are older and may not have many years left to enjoy the inheritance. However, once a beneficiary has possession of the assets, he or she could lose them to creditors, a lawsuit, or a divorce settlement. Even a current spouse can have access to assets that are placed in a joint account or if the recipient adds the spouse as a co-owner. For parents who are concerned that a son-or daughter-in law could end up with their assets, or that a creditor could seize them, or that a child might spend irresponsibly, a lump sum distribution may not be the right choice.
Option 3: Installments
Many parents like to give their children more than one opportunity to invest or use the inheritance wisely, which doesn't always happen the first time around. Installments can be made at certain intervals (say, one-third upon the parent's death, one-third five years later, and the final third five years after that) or when the heir reaches certain ages (say, age 25, age 30 and age 35). In either case, it is important to review the instructions from time to time and make changes as needed. For example, if the parent lives a very long time, the children might not live long enough to receive the full inheritance--or, they may have passed the distribution ages and, by default, will receive the entire inheritance in a lump sum.
Option 4: Keep Assets in a Trust

Assets can be kept in a trust and provide for children and grandchildren, but not actually be given to them. Assets that remain in a trust are protected from a beneficiary's creditors, lawsuits, irresponsible spending, and ex- and current spouses. The trust can provide for a special needs dependent, or a child who might become incapacitated later, without jeopardizing valuable government benefits. If a child needs some incentive to earn a living, the trust can match the income he/she earns. (Be sure to allow for the possibility that this child might become unable to work or retires.) If a child is financially secure, assets can be kept in a trust for grandchildren and future generations, yet still provide a safety net should this child's financial situation change.


March 2013

Incorporating Faith and Values in Estate Planning

For many, passing along religious beliefs and values to the next generation is just as important as passing along financial wealth and tangible assets. Estate planning creates many opportunities to do this, including:

* End-of-Life Care. A health care power of attorney (Advance Directive in some states) lets you name someone to make medical decisions for you in the event you cannot make them yourself. This can be someone who shares your faith and values about end-of-life issues or someone who will honor your wishes. In either case, it is a good idea to provide written instructions about things like organ donation, pain medication (some may want to remain conscious at the end of life), hospice arrangements, even avoiding care in a specific facility. A visit by a priest, rabbi or other member of clergy may be desired. Pregnant women may want to include their preference on medical decisions that would impact the mother and her unborn child.

* Funeral and Burial Arrangements. Faith can influence views on burial, cremation, autopsy, even embalming. Faith may also influence certain details in a funeral or memorial service. Some people pre-plan their services and include a list of people to notify (which can be helpful for a grieving family). Some even pre-pay for the funeral and burial plots to prevent their loved ones from overspending out of grief and/or guilt.

* Charitable Giving. Giving to others who are less fortunate is common among people of all faiths. Making final distributions to a church or synagogue, university, hospital and other favorite causes will convey the value of charitable giving to family members.

* Distributions to Children and Grandchildren. Taking the time to plan how assets are left to family members lets them know how much they are loved, and is another way to convey faith values. For example, providing for the religious education of children and/or grandchildren speaks volumes. Parents of young children can select someone who shares their religious views to manage the inheritance. A letter of instruction to the guardian can include views on the care and upbringing of young children, which are often influenced by faith.

If the children are older and a son- or daughter-in-law is not fully trusted, an attorney can assist with providing for a son or daughter in a way that will prevent an inheritance from falling into the wrong hands. However, making an inheritance conditional or disinheriting a child or grandchild who marries outside the faith or doesn't share their parent's faith can backfire. We cannot really force someone to believe as we do, and trying to do so by withholding an inheritance will only create discord in the family and may not be recognized. The emotional scars on the family, especially if a bitter legal fight results, are probably not what parents want for their family.

Transferring faith and values to family members is best done over time, by letting them see your faith at work in your life, taking them to religious services, and letting them see you being charitable. But it's never too late. Talk to your family while you can. Explain what your faith means to you and how it has helped you through difficult moments in your life. You can also write personal letters or make a video that they can keep and review long after you are gone.


February 2013

Estate Planning in 2013 and Beyond under the New Tax Law

The recent tax legislation dealing with the "fiscal cliff" included significant revisions to the estate tax law that will affect estate planning for the foreseeable future. These revisions include:
* The federal gift, estate and generation-skipping transfer tax provisions were made permanent as of December 31, 2012. This is great news because, for more than ten years, we have been planning with uncertainty under legislation that contained expiration dates. And while "permanent" in Washington only means that this is the law until Congress decides to change it, at least we now have some certainty with which to plan.
* The federal gift and estate tax exemption will remain at $5 million per person, adjusted annually for inflation. In 2012, the exemption (with the adjustment) was $5,120,000. The amount for 2013 is expected to be $5,250,000. This means that the opportunity to transfer large amounts during lifetime or at death remains, so those who did not take advantage of this in 2011 or 2012 can still do so. Also, with the amount tied to inflation, more assets can be transferred each year.
* The generation-skipping transfer (GST) tax exemption also remains at the same level as the gift and estate tax exemption ($5 million, adjusted for inflation). This tax, which is in addition to the federal estate tax, is imposed on amounts that are transferred (by gift or at death) to grandchildren and others who are more than 37.5 years younger than you; in other words, transfers that "skip" a generation. Having this exemption now be "permanent" allows for planning that will greatly benefit future generations.
* Married couples can take advantage of these higher exemptions and, with proper planning, transfer up to $10+ million through lifetime gifting and at death.
* The tax rate on estates larger than the exempt amounts increased from 35% to 40%.
* The "portability" provision was also made permanent. This allows the unused exemption of the first spouse to die to transfer to the surviving spouse, without having to set up trust planning specifically for this purpose. However, there are still many benefits to using trusts, especially for those who want to ensure that their estate tax exemption will be fully utilized by the surviving spouse.
* Separate from the new tax law, the amount for annual tax-free gifts has increased to $14,000.
Therefore, for most Americans the 2012 Tax Act has removed the emphasis on estate tax planning and put it back on the real reasons to do estate planning: taking care of ourselves and our families the way we want. Those who might be tempted to skip estate planning because their estates are less than the $5 million range should remember that proper estate planning provides peace of mind by allowing Americans to:
* Avoid state inheritance/death taxes that have lower exemptions than federal taxes;
* Avoid probate, which can be quite expensive and time-consuming in some states;
* Ensure their assets are distributed the way they want;
* Protect an inheritance from irresponsible spending, a child's creditors, and from being part of a child's divorce proceedings;
* Provide for a loved one with special needs without losing valuable government benefits;
* See that control of their assets remains in the hands of a trusted person;
* Provide for minor children or grandchildren;
* Help protect assets from creditors and frivolous lawsuits (especially important for professionals);
* Protect themselves, their family and their assets in the event of incapacity; and
* Help create meaningful charitable gifts.
For those with larger estates, ample opportunities remain to transfer large amounts tax-free to future generations. But with the increase in estate and income tax rates, it is critical that professional planning begins as soon as possible. Also, with Congress looking for more ways to increase revenue, many reliable estate planning strategies may soon be restricted or eliminated. Thus, it is best to put these strategies into place now so that they are more likely to be grandfathered from future law changes.
For those who have been sitting on the sidelines, waiting to see what Congress would do, the wait is over. Now that we have some certainty with "permanent" laws, there is no excuse to postpone planning any longer.

February 2013

VA Benefits For Long-Term Care of Veterans and Their Surviving Spouses

Many wartime veterans and their surviving spouses are currently receiving long-term care or will need some type of long-term care in the near future. The Veterans Administration has funds that are available to help pay for this care, yet many families are not even aware that these benefits exist. 
Pension with Aid and Attendance pays the highest amount and benefits a veteran or surviving spouse who requires assistance in activities of daily living (dressing, undressing, eating, toileting, etc.), is blind, or is a patient in a nursing home. Assisted care in an assisted living facility also qualifies.
Pension with Housebound Allowance is for those who need regular assistance but would not meet the more stringent requirements for Aid and Attendance, and wish to remain in their own home or the home of a family member. Care can be provided by family members or outside caregiver agencies.
Basic Pension is for veterans and surviving spouses who are age 65 or older or are disabled, and who have limited income and assets.
Qualifying for Benefits
A veteran does not need to have service-related injuries to qualify for these pension benefits, but must meet certain wartime service and discharge requirements. A surviving spouse must also meet marriage requirements to the qualified veteran. Certain requirements must be met for a disability claim if the claimant (the veteran or surviving spouse filing for benefits) is less than age 65. 
When determining eligibility, the VA looks at a claimant’s total net worth, life expectancy, income and medical expenses. A married veteran and spouse should have no more than $80,000 in “countable assets,” which includes retirement assets but does not include a home and vehicle. This amount is a guideline and not a rule.
Income for VA Purposes (called IVAP) must be less than the benefit for which the claimant is applying. IVAP is calculated by subtracting “countable medical expenses” (recurring out-of-pocket medical expenses that can be expected to continue through the claimant’s lifetime) from the claimant’s gross income from all sources.
Note: It is possible to reduce assets and income to a level that will be acceptable to the VA. For example, excess liquid assets (such as cash or stocks) could be converted to an income stream through the use of an annuity or promissory note. However, because the claimant may need to qualify for Medicaid in the future, it is critical that any restructuring or gifting of assets be done in a way that will not jeopardize or delay Medicaid benefits. An attorney who has experience with Elder Law will be able to provide valuable assistance with this.
Applying for Benefits
It often takes the VA more than a year to make a decision, but once approved, benefits are paid retroactively to the month after the application is submitted. Having proper documentation (discharge papers, medical evidence, proof of medical expenses, death certificate, marriage certificate and a properly completed application) when the application is submitted can greatly reduce the processing time.
Because time is critical for these aging veterans and their surviving spouses, application should be made as soon as possible. For more information, visit


                                                                                                                                                         July 2012

Year-end Planning

On May 21, 2012, Governor Haslam signed into law legislation that eliminates Tennessee’s gift tax and phases out its inheritance tax. The inheritance tax will be phased out over the next four years by gradually increasing the state exemption amount as follows: 1,250,000-2013; 2,000,000-2014; 5,000,000-2015 and Complete Repeal-2016. The Tennessee gift tax was repealed effective January 1, 2012. This legislation along with the 5,120,000 lifetime gift exemption which is available until December 31, 2012, allows a rare opportunity to make significant gifts reducing your estate without a State gift tax consequence.       
Never before have individuals been able to so easily shift so much wealth out of their estates tax-free during life and come 2013, they may never be able to do so again. The federal inheritance tax exemption and gift tax exemption will be reduced to $1,000,000.00 per person as of January 1, 2013, when the provisions of the 2010 Tax Act expire December 31, 2012.         

The gifts may be made to lifetime trusts for the benefit of the beneficiaries. Also, gifts may be made through split interest gifts which allow the donor to retain an income interest while passing the principal to family members and others. Examples include a qualified personal residence trust, grantor retained annuity trust and spousal lifetime access trust. Likewise, charitable remainder trusts and charitable lead trusts provide significant tax advantages for the donor during lifetime while also benefitting charitable organizations.

Given this short window of opportunity, now is the time to take action by reviewing your existing estate planning documents and considering gifting opportunities. In addition, don’t lose sight of non-tax issues such as blended families, avoidance of probate, business succession, asset protection or special needs beneficiaries.



                                                                                                                                     June 2012

Estate Planning for Families

No matter how large or how modest, everyone has an estate and something in common-you can’t take it with you when you die. When that happens, you want to control how your assets are distributed to the people and organizations you choose. A properly drafted estate plan will ensure your wishes are followed and provide a financial legacy as well as personal legacy for your beneficiaries.

Good estate planning should include instructions for passing your value (religion, education, hard work, etc.) in addition to your assets. While a will or trust can direct the distribution of your assets, it can also be used as written directive to your family and loved ones which reflects your family values and encourages unity. These include providing for your spouse and children, naming a guardian for your minor children, choosing who will be in charge of distributing your assets and winding up your affairs, creating trusts which provide for the education and other needs of your beneficiaries, providing a business succession plan and devising real estate which you wish to remain in the family. In addition, your estate plan can include charitable gifts which continue long after your death.

Failing to plan can result in devastating financial and emotional consequences. Knowing you have a properly prepared plan in place which contains your instructions and will protect your family will give you and your loved ones peace of mind. Leaving a lasting legacy is one of the most thoughtful and considerate things you can do for yourself, the ones you love and the charities you support.