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2019 IRS Contribution Limits for 401k, 403(b) and IRA Retirement Accounts

Posted on Dec 9 2018 2:37PM by Attorney, Jason A. Lee

The IRS recently announced the new cost of living adjustments to the annual limits on retirement contributions for 2019.  These are the limits that outline the amount of money you can contribute to certain tax benefited retirement plans.  This can and should affect how you formulate your Tennessee estate and retirement planning.  A really good strategy for long term estate planning is to make sure a significant portion of your assets are in these tax advantaged accounts.

 

The new 2019 annual limits for contributions to a 401(k), 403(b), most 457 plans and the federal government Thrift Savings Plan increases for 2019 to $19,000.00.  This is the first change we have had in a few years and it is certainly good news for retirement savers.  The annual catchup contribution allowance for these plans, available to those over 50, stands at $6,000.00 for 2019.   As a result, someone over the age of 50 can contribute $25,000.00 annually to their 401k starting in 2019.

 

The limit for contributions to an IRA (Roth or normal IRA) also went up in 2019.  It is now a limit of $6,000.00.  For those who take advantage of the Roth IRA, the AGI (Adjusted Gross Income) phase-out level for the ability to contribute was adjusted up for 2019.  The phase-out now begins at $193,000.00 for married couples filing jointly and $122,000.00 for singles and heads of household.  Once you hit these levels, the ability to contribute begins to phase out until it is eliminated on a gradual scale.

 

It is important to work to update your beneficiary designations on your retirement and other accounts while you review if any of the above changes can affect you.  In Tennessee, if you have a proper beneficiary designation, these assets can pass outside of probate.  If you do not have any designation or if you name your estate the beneficiary, then this money will pass through your estate in the probate process.  This will certainly extend the time it will take to get to the proper beneficiaries.  Sometimes this is necessary or preferred, but it is really important to make an informed decision on this issue.  Many times, the beneficiary designations do not match the terms in the Will - and this is usually unintended.  Life circumstances also change and this is an important thing to remember so your beneficiary designations match your intentions that are expressed in your Will.

 

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TAGS: Retirement plans - 401k etc., Wills, Probate Assets Comments [0]
  
 

Living Wills Under Tennessee Law Are Very Important

Posted on Mar 11 2018 1:56PM by Attorney, Jason A. Lee

Tennessee law provides the authority to execute a "Living Will" according to the "Tennessee Right to Natural Death Act" which has been law since the mid-1980’s.  A Living Will allows you to make decisions related to end of life issues like the decision to not be kept alive by artificial means if you have a terminal condition and there is no expectation of recovery.   T.C.A. § 32-11-102 provides the legislative intent for a “Living Will” as follows:

 

(a) The general assembly declares it to be the law of the state of Tennessee that every person has the fundamental and inherent right to die naturally with as much dignity as circumstances permit and to accept, refuse, withdraw from, or otherwise control decisions relating to the rendering of the person's own medical care, specifically including palliative care and the use of extraordinary procedures and treatment. The general assembly further declares that it is in the public interest to facilitate recovery of organs and/or tissues for transplantation and to provide mechanisms for individuals to express their desire to donate their organs and/or tissues.

(b) The general assembly does further empower the exercise of this right by written declaration, called a “living will,” as provided in this chapter.

 

T.C.A. § 32-11-105 provides a specific form for a Living Will in Tennessee.  This statute provides a form that is acceptable under Tennessee law for a Living Will and many individuals in Tennessee have executed this document to remove these decisions from their loved ones. Decisions about letting a person die naturally can be some of the hardest decisions a family member will ever need to make about a loved one.  But this decision is also very important.

 

T.C.A. § 32-11-104 also provides specific requirements for the execution of a living will.  An executed living will can be signed by "any competent adult person" according to T.C.A. § 32-11-104.  The declaration must be in writing and signed by the principal and is valid if it is attested by a notary public with no witnesses or by two witnesses without an attestation of a notary public.  If the witness method is used then at least one of the witnesses must not be related to the individual exec...

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TAGS: Living Will Comments [0]
  
 

Methods to Gain Access to a Safety Deposit Box After a Person Dies in Tennessee

Posted on Jan 13 2018 4:41PM by Attorney, Jason A. Lee

A frequent question that is raised following someone death is how someone can get access to their safety deposit box post death in Tennessee.  This includes questions about who is entitled to this access the box in this circumstance.  This issues usually comes to a head when family members are trying to locate a will that cannot be found or to determine if there are any valuables in the box.  The Tennessee legislature adopted a statute to address this specific situation.

 

T.C.A. § 45-2-905 is the statute that addresses access to a safety deposit box after someone’s death but it has several other provisions related to safety deposit boxes that I will not address here.  The key portion for our purpose is found in subsection (c) as follows:

 

(c) Upon the death of the sole or last surviving lessee of a safe deposit box, access is authorized as follows:

(1) The duly qualified executor or administrator of the lessee may have access to and remove contents from the safe deposit box, without inventory unless an inventory is required by the lessor or by court order;

(2) In order to search for and remove any written instrument purporting to be the lessee's last will and testament, or any writing relating to a burial plot or burial instructions, or any writing purporting to be an insurance policy on the life of the lessee, a lessor shall permit a person named in a court order for that purpose, or if no order has been served upon the lessor, the lessee's spouse, parent, adult sibling or adult descendant, or a person named as executor in a copy of the lessee's purported will provided to the lessor, or any person with a right of access to the safe deposit box immediately prior to the death of the lessee, to open the safe deposit box with an officer or employee of the lessor and remove the documents. A record of items removed from the box by the person authorized entry shall be made by the lessor and the other person. If a purported will is found that does not name as executor the person conducting the will search with the lessor's representative, the lessor may make a copy thereof and mail or deliver it to the executor named therein, or to the court having jurisdiction of the decedent's estate according to the decedent's domicile as declared in the instrument; and

(3) If an executor or administrator of the lessee's estate has not requested access to the contents within sixty (60) days following the lessee's death, the lessor may then permit access by the surviving spouse or any next-of-kin of the lessee for the purposes of inventory and the removal of contents. Prior to removal, an officer or employee of the lessor and the surviving spouse or next-of-kin of the lessee shall inventory the contents of the box and prepare a record thereof to be retained by the lessor.

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TAGS: Executor/Executrix, Probate Assets, Tennessee Probate Law Comments [0]
  
 

2018 IRS Contribution Limits for 401k, 403(b) and IRA Retirement Accounts.

Posted on Nov 26 2017 3:06PM by Attorney, Jason A. Lee

The IRS recently announced the new cost of living adjustments to the annual limits on retirement contributions for 2018.  These are the limits that identify the amount of money you can contribute to certain tax benefited retirement plans.  This can and should affect how you formulate your estate and retirement planning in Tennessee.  A really good strategy for long term estate planning is to make sure a significant portion of your assets are in these tax advantaged accounts.

 

The new 2018 annual limits for contributions to a 401(k), 403(b), most 457 plans and the federal government Thrift Savings Plan remains the same as the prior year at $18,500.00.  This is the first change in several years and it welcome news for retirement savers.  The annual catchup contribution allowance for these plans, available to those over 50, stands at $6,000.00 for 2018.   As a result, someone over the age of 50 can contribute $24,500.00 annually to their 401k starting in 2018.

 

The limit for contributions to an IRA (Roth or normal IRA) is unchanged for 2018.  It remains at $5,500.00.  For those who take advantage of the Roth IRA, the AGI (Adjusted Gross Income) phase-out level for the ability to contribute was adjusted up for 2018.  The phase-out now begins at $189,000.00 for married couples filing jointly and $120,000.00 for singles and heads of household.  Once you hit these levels, the ability to contribute begins to phase out until it is eliminated.

 

You need to work to update your beneficiary designations on your retirement and other accounts while you review if any of the above changes can affect you.  In Tennessee, if you have a proper beneficiary designation, these assets can pass outside of probate.  If you do not have any designation or if you name your estate as the beneficiary, then this money will pass through your estate in the probate process.  This will certainly extend the time it will take to get to the proper beneficiaries.  Many times, the beneficiary designations do not match the terms in the Will - and this is usually unintended.  Life circumstances also change and this is an important thing to remember so your beneficiary designations match your intentions that are expressed in your Will.

 

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TAGS: Retirement plans - 401k etc., Taxes Comments [0]
  
 

Non-Probate Assets in Tennessee

Posted on Oct 12 2017 11:57AM by Attorney, Jason A. Lee

There is often confusion on what type of assets are not considered probate assets in Tennessee.  These types of assets do not require formal estate administration, most of the time.  When you are responsible for handling an estate or are appointed as an executor, you need to determine what assets are required to be brought through the Tennessee probate process and what assets are not required to be brought into Probate.  Planning ahead on this issue is also important for individuals so they can have a streamlined post death estate administration process. 

 

Non-Probate assets in Tennessee include the following:

 

1.          401k plan, IRA plan or other type of retirement plan that has the designation of a specific beneficiary (except where the beneficiary is the person’s estate).

 

2.          Bank accounts, real estate, automobiles or other assets that are titled in the name of the deceased individual and another individual as joint tenants or tenants by the entirety with right of survivorship.  These assets pass immediately upon death to the other individual because they are jointly owned.

 

3.          Assets that are titled in the decedent's name with a "transfer on death" or "pay on death" designation to a specific beneficiary.  This is often done for bank accounts in one person’s name so the money is immediately transferred at the time of death.

 

4.          Life insurance policies that have a specific beneficiary designated other than the estate of the deceased individual.

 

This determination should be made soon after a person dies by the individuals responsible to handle their estate.  This will allow that responsible person to know whether a Will needs to be probated under Tennessee law.


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TAGS: Executor/Executrix, Probate Assets, Tennessee Probate Law Comments [0]
  
 

Impact of Divorce on Terms in a Will that Benefit the Former Spouse in Tennessee

Posted on Aug 27 2017 11:56AM by Attorney, Jason A. Lee

When a Will is executed by someone, and then they are later divorced, the divorce revokes any benefits that were going to go to the former spouse under the Will.  This revocation is automatic and by statute that was passed by the Tennessee legislature.  T.C.A. § 32-1-202(a) provides as follows:

 

(a) If after executing a will the testator is divorced or the testator's marriage annulled, the divorce or annulment revokes any disposition or appointment of property made by the will to the former spouse, any provision conferring a general or special power of appointment on the former spouse, and any nomination of the former spouse as executor, trustee, conservator or guardian, unless the will expressly provides otherwise.

 

When individuals remarry after their divorce, the provisions that were revoked by T.C.A. § 32-1-202, are automatically revived by the subsequent remarriage.  Additionally, under T.C.A. § 32-1-202(d) a formal separation (by court order or otherwise) does not terminate the status as husband and wife and is not considered a divorce for purposes of this section.  In other words, a formal legal separation does nothing to the terms of a Will that benefit a spouse.  Only a final divorce changes the terms of the Will.  This section provides:

 

(d) For purposes of this section, divorce or annulment means any divorce or annulment that would exclude the spouse as a surviving spouse within the meaning of § 31-1-102(b). A decree of separation that does not terminate the status of husband and wife is not a divorce for purposes of this section.

 

This statute needs to be considered anytime there is an individual who dies who has been divorced when they still have any provision for their ex-spouse in their will.  It is important to note that under Tennessee law there is not an automatic revocation of a life insurance policy that benefits your spouse after a divorce.  The Tennessee Supreme Court has ruled on this issue previously.  I have blogged on this topic and

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TAGS: Life Insurance, Wills, Divorce/Annulment Comments [0]
  
 

Can You Have a Handwritten Will in Tennessee – and Should You?

Posted on Jul 30 2017 3:20PM by Attorney, Jason A. Lee

Some people decide to do Wills that are written in their own handwriting (handwritten Wills).  It is my advice that this is a very poor decision and you should always consult a Tennessee Wills attorney to help you make sure that this very important document is done correctly.  Even though that is my best advice, I know some people will ignore this advice.  As a result, I will answer the question.  Yes, you can have a handwritten Will but it is a very bad idea.  A handwritten will is called a holographic Will.  A holographic will must be done in the handwriting of the testator. 

 

There are three different types of Wills under Tennessee law that are allowed.

 

(1) Normal Will with execution completed pursuant to T.C.A. § 32-1-104.

(2) Holographic Will pursuant to T.C.A. § 32-1-105 (in handwriting of the testator)

(3) Noncupative Will pursuant to T.C.A. § 32-1-106 (will completed while in imminent peril of death)

 

Under Tennessee law a handwritten or holographic Will must comply with the specific requirements found in T.C.A. § 32-1-105 which provides as follows:

 

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TAGS: Holographic Will, Wills, Witnesses to will, Will Contest, Tennessee Probate Law Comments [0]
  
 

Should You Add Your Children to Your Financial Accounts When You Need Financial Assistance Later in Life?

Posted on Jun 25 2017 3:38PM by Attorney, Jason A. Lee

A significant number of older individuals in Tennessee add one or more of their children to their bank accounts to help them manage their finances.  They often do this as joint owners with right of survivorship in order to have them help to pay the bills and to take care of other matters late in life.  This can be an option that sounds very appealing.  However, doing this is a major problem and can cause devastating financial consequences that are completely unintended.   

 

When someone adds another person as a joint owner on the account, any judgments that the other person obtains against them, could lead to collection efforts against your bank account.  Once the other person is an owner, they are an owner of your account for all purposes.  For instance, if one of your children gets into a serious car accident and severely injures or kills someone else, but they have insufficient insurance coverage to pay for the damages, then the injured party could obtain a judgment against them.  They could then execute against your account to pay the judgment.

 

Also, when an individual is added to an account as an owner with right of survivorship, then upon the elderly individuals passing, the entire account passes to the other owner pursuant to the right of survivorship terms.  This can cause an unequal distribution of assets among children.  For instance, even if the Will clearly states that everything should be split between your children equally, this money in the account passes outside of that requirement.  This may not be intended and can cause real problems between family members after their loved one dies. 

 

Additionally, the bank account will be considered part of your child’s assets for purposes of bankruptcy.  If they need to declare bankruptcy, your account could become an asset of the bankruptcy process and you could lose everything.  As a result, there is a tremendous risk in adding even responsible and financially stable individuals as owners of your account.  I recommend against doing this in almost all circumstances because the downside consequences can be so devastating. 

 

There are other options available to you like completing a

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TAGS: Creditor claims, Power of Attorney, Probate Assets, Tennessee Probate Law Comments [0]
  
 

Tennessee Supreme Court Finds That Joint Tenancy With Right of Survivorship is Destroyed by Quitclaim Deed of One Party to Deed

Posted on Apr 30 2017 2:00PM by Attorney, Jason A. Lee

The Tennessee Supreme Court recently decided an important case on an issue that had not yet been decided in Tennessee. The case of Darryl F. Bryant, Sr. v. Darryl F. Bryant, Jr., No. M2014-02379-SC-R11-CV, 2017 WL 1404388 (Tenn. 2017) decided a key issue pertaining to Joint Tenancy with Right of Survivorship. In this case, the owner (Ms. Bryant) of the property in question issued a deed conveying the property to herself and her son as Joint Tenants with Right of Survivorship. This occurred in 2009. Interestingly, a little bit more than one year later on September 2, 2010, the original owner, Ms. Bryant, executed another Quitclaim Deed on the same property. This Quitclaim Deed purported to convey the property to her grandson, Darryl F. Bryant, Jr.  She deeded all of her interests in the property to this grandson in this deed.

 

Ms. Bryant died in November of 2013 and then a dispute arose between Ms. Bryant’s son, Darryl F. Bryant, Sr. and grandson, Darryl F. Bryant, Jr. The legal issue that governed this situation is whether Joint Tenancy with the Right of Survivorship can be terminated by one party. In other words, Ms. Bryant deeded the property as a Joint Tenancy with Right of Survivorship to herself and her son. She then later deeded her interest in the property to her grandson (essentially her ½ interest in the Joint Tenancy with Right of Survivorship). The question, therefore, was whether the second deed terminated the Right of Survivorship in the first deed, unilaterally, without permission or input by the co-owner, Darryl Bryant, Sr.  If it did not, then Darryl F. Bryant Sr. would own the property outright due to Ms. Bryan’s death.

 

The Tennessee Supreme Court analyzed several prior Tennessee opinions as well as other states’ assessment of this issue.  Ultimately, the Tennessee Supreme Court found that “joint tenancy with an express right of survivorship may be severed by the unilateral action of one of the joint tenants and that doing so converts the estate into a tenancy in common and destroys the survivorship interests of the original joint tenants.” (Bryant Sr. at p. 15).  In other words, the conveyance by one of the joint tenancy owners, who owns the property with a right of survivorship, essentially converts the holding of the property to tenancy in common when they deed their interest to another party. That is exactly what occurred in this case. The Court then considered this specific case and found that when Ms. Bryant conveyed her interest in the property to the grandson, it severed her joint tenancy with right of survivorship with her son. At that point, the son and grandson became tenant in common owners and the right of survivorship was destroyed at that time.

 

This case can certainly have implications in estates and real estate transactions. It is an important principle that will apply to all real estate transactions and estates in Tennessee. The fact there is a right of survivorship at the time of an original deed does not mean the right of survivorship can never be modified, as is shown in this case. This is true even without the approval of all of the owners of the pr...

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TAGS: Real Estate, Tennessee Probate Law Comments [0]
  
 

2017 Limits for Federal Estate and Gift Tax Exemptions; Tennessee Inheritance Tax Abolished since 2016

Posted on Mar 5 2017 8:00PM by Attorney, Jason A. Lee

The IRS has introduced new cost of living adjustments to the federal estate and gift tax exemption someone can use over their lifetime.  The new federal estate and gift tax exemption will be $5.49 million dollars in 2017.  This is an increase from the prior exemption of $5.45 million for 2016.  As a result, an additional $40,000.00 can be passed on by gift or in your estate, tax free starting in 2017. 

 

Unfortunately, the annual tax free gift exclusion amount stays at the same level at a total of $14,000.00 (this amount has been in place since 2013).  This is the annual dollar amount of gifts that can be given to an individual without counting toward the lifetime consolidated exemption of $5.49 million for 2017.  As a result, each year you can give up to $14,000.00 to an individual using the annual gift tax exclusion (in fact a married couple can each give the $14,000.00 – totaling $28,000.00 for each calendar year).  These gifts will not count towards your lifetime exemption amount for the Federal Estate tax.

 

Estate taxes are becoming less relevant to the majority of Americans due to the “permanent” fix that was provided by the federal government a few years ago.  The estate tax simply does not impact the vast majority of people.  Additionally, the Tennessee inheritance tax is now abolished in Tennessee for any person who dies in 2016 or later.  It simply does not exist any longer.  So there are no separate considerations needed to handle any Tennessee inheritance tax.

 

Follow me on Twitter at @jasonalee for updates from the Tennessee Wills and Estates blog.
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TAGS: Tennessee Inheritance Tax, Federal Estate Tax Comments [0]
  
 
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Jason A. Lee is a Member of Burrow Lee, PLLC. Contact Jason at 615-540-1004 or jlee@burrowlee.com for an initial consultation on wills estate planning and probate issues.

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Tennessee Wills and Estates Blog
Jason A. Lee, Member of Burrow Lee, PLLC
611 Commerce Street, Suite 2603
Nashville, TN 37203
Phone: 615-540-1004
E-mail: jlee@burrowlee.com

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