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Posted on Jun 25 2017 3:38PM by Attorney, Jason A. Lee
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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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Posted on Mar 20 2016 8:50PM by Attorney, Jason A. Lee
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One question that is often asked is how
creditor claims are handled if there is insufficient money in the estate to pay
all of the claims. T.C.A. § 30-2-317 provides a list showing the priority for
any creditor claim against the estate of a deceased individual in Tennessee. Claims and demands against an estate are
divided into certain categories and the statue provides the order in which the
claims or demands are to be paid. T.C.A.
§ 30-2-317
provides the priority for claims against the estate as follows:
(a) All claims or
demands against the estate of any deceased person shall be divided into the
following classifications, which shall have priority in the order shown:
(1) First: Costs of
administration, including, but not limited to, premiums on the fiduciary bonds
and reasonable compensation to the personal representative and the personal representative's
counsel;
(2) Second:
Reasonable funeral expenses;
(3) Third: Taxes and
assessments imposed by the federal or any state government or subdivision of
the federal or any state government, including claims by the Bureau of TennCare
pursuant to § 71-5-116; and
(4) Fourth: All
other demands that may be filed as aforementioned within four (4) months after
the date of notice to creditors.
Category number four basically provides the
last layer of priority and is designed to account for all other possible
categories of creditors. This statute
also provides specific instructions to the personal representative of the
estate on how to pay the claims according to the priority found in this
statute. T.C.A.
§ 30-2-317(b)
provides as follows:
(b) All demands
against the estate shall be paid by the personal representative in the order in
which they are classed, and no demand of one class shall be paid until the
claims of all prior classes are satisfied or provided for; and if there are not
sufficient assets to pay the whole of any one class, the claims in that class
shall be paid pro rata.
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Posted on Aug 9 2014 2:51PM by Attorney, Jason A. Lee
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An individual who
dies who owes money to creditors is largely still responsible for that debt
after they are deceased. Specifically,
their estate owes the money to the creditors. Many people are confused about this. It is important to note that if nobody else
was a co-signor or legally responsible for the debt, then family members, even
spouses are not necessarily responsible for the debt. Be very careful when receiving creditor
collection calls after your loved ones passing because often they will try to
get others to pay the debt of the deceased – often these individuals are not actually
legally responsible for this debt.
Required Notice to
Creditors:
If a probate estate
is opened up for a deceased person, then the creditors are put on notice of the
opening of the estate and they have a certain amount of time (generally 4
months) to file a claim against the estate. See T.C.A.
§ 30-2-306. This is a formal
requirement and requires an actual filing of the claim in the Tennessee probate
estate. Any and all known creditors must
be specifically sent notice of the opening of the estate. See T.C.A.
§ 30-2-306. Additionally, an advertisement
must be placed in a newspaper on two consecutive weeks to put additional
creditors on notice. See T.C.A.
§ 30-2-306. If the creditors do not
file a claim with the estate within the appropriate statutory time period then
their claim can be completely waived.
Additionally, if a probate estate is not opened up in a timely fashion
then creditors can actually open up an estate in order to make sure they
collect on the amount of money that is owed to the creditor. Of course this only makes sense if there are
actual assets in the estate.
Creditor Claims Are
Extinguished After 12 Months Post-Death:
One other very
important thing to know is that if an estate is not opened up until greater
than 12 months after death, then you are not required to provide a notice of
creditors and the creditor claims against the estate are considered to be
expired (except for TennCare). For this
reason, it is extremely important that if you have a claim aga...
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Posted on Mar 21 2014 12:45PM by Attorney, Jason A. Lee
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One thing a significant amount of people
do not realize is that a 401K is not necessarily part of someone’s estate in
Tennessee. As a result, almost always
401k assets are not distributed pursuant to the intentions expressed in your
will. Some people believe a 401k passes
pursuant to whatever terms are in their will but this is simply not true. As a general rule, when someone dies, their 401k
proceeds are not distributed under the will.
They are instead distributed based on the beneficiary designations in
the 401k. This is important to remember
when constructing an appropriate estate plan.
It also should cause you to check your beneficiary designations
periodically to make sure they match your intentions.
However, there are some circumstances where
the 401k could be paid to the estate (and therefore pursuant to the will). For instance, if somebody does not list any
beneficiary on the 401k, then the proceeds
would be paid into the estate (unless the 401k plan documents dictate
otherwise). Additionally, people can
list their estate as the beneficiary for the 401k. There are only a very limited number of
circumstances where this would be appropriate.
Due to the tax and other consequences
of such a designation, it is almost always better to list an individual as
the beneficiary of a 401k.
Due to the fact the 401k money is generally
distributed pursuant to the beneficiary designation, the 401k assets are not part of a
probate estate (however, they are still counted for purposes of the Tennessee
Inheritance Tax and Federal
Estate Tax). This is usually a
positive so you can avoid the claims of creditors in a probate estate and so
the money can be distributed to the beneficiaries faster.
As a result, when planning how your assets
will be distributed to your heirs or children, it is important to keep this information
in mind. If you desire to have your
assets split equally among all of your children, for instance, then make sure
your beneficiary designations on your 401k and life insurance policies reflect
this intention. Sometimes people have
their will
done correctly where it shows that all their assets should be split equally
among their children, but they do not pr...
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Posted on Mar 3 2014 11:44PM by Attorney, Jason A. Lee
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Under Tennessee law, real property of an
intestate decedent (an individual who dies without a will) vests immediately in
the heirs upon death. Additionally, the
real property of a testate decedent (an individual who dies with a will) vests
immediately in the beneficiaries named in the will unless the will gives directions
to administer the real property through the estate. T.C.A.
§ 31-2-103 provides in totality as follows:
The real property
of an intestate decedent shall vest immediately upon death of the decedent in
the heirs as provided in § 31-2-104. The real
property of a testate decedent vests immediately upon death in the
beneficiaries named in the will, unless the will contains a specific provision
directing the real property to be administered as part of the estate subject to
the control of the personal representative. Upon qualifying, the personal
representative shall be vested with the personal property of the decedent for
the purpose of first paying administration expenses, taxes, and funeral
expenses and then for the payment of all other debts or obligations of the
decedent as provided in § 30-2-317. If the
decedent's personal property is insufficient for the discharge or payment of a
decedent's obligations, the personal representative may utilize the decedent's
real property in accordance with title 30, chapter 2, part 4. After payment of
debts and charges against the estate, the personal representative shall
distribute the personal property of an intestate decedent to the decedent's
heirs as prescribed in § 31-2-104, and the property
of a testate decedent to the distributees as prescribed in decedent's will.
This statute does not mean that real
property cannot be used to pay any debts or obligations of the decedent. This statute specifically provides that if
the decedent's personal property is insufficient to discharge all of the
decedent's obligations then the real property can be sold to satisfy those
obligations. It is important to have an
experienced Tennessee probate attorney to assist you when dealing with real
estate property in the context of an estate.
Follow me on Twitter at @jasonalee for updates from the
Tennessee Wills and Estates blog.
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Posted on Jan 11 2014 5:39PM by Attorney, Jason A. Lee
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The
answer is almost always no. As long as
the life insurance policy has named beneficiaries (other than the estate) it is
not subject to probate in Tennessee and passes outside of probate. (for a
discussion on other assets that are no probate assets read this article here). Most often, the named beneficiaries simply
need to fill out some forms that the life insurance company has and the money
will be distributed rather quickly. This
payment is not subject to creditors of the person who died (See T.C.A.
§ 56-7-201).
T.C.A.
§ 56-7-201 also provides that even if the estate is listed as a beneficiary
of the life insurance policy, the money is still not subject to the debts of
the decedent unless specifically stated in the will. The entire text of T.C.A.
§ 56-7-201 provides as follows: On the death of an insured, any life insurance
acquired by the insured or the insured's spouse and payable to the intestate
insured's estate benefits the surviving spouse and children and the proceeds
shall be divided between them according to the statutes of distribution without
being in any manner subject to the debts of the decedent. If the proceeds of
the insurance are payable to the estate of a testate decedent or the trustee of
a revocable trust of which the decedent was a settlor, the proceeds shall pass
as part of the estate or trust and under the dispositive provisions of the will
or trust agreement, as ordinary cash, whether or not the will or trust
agreement uses any apt or express words referring to the insurance proceeds,
but the proceeds shall not be subject to the debts of the decedent unless
specifically charged with the debts in the will or trust agreement.
As
a result, even naming the estate as a beneficiary in your life insurance policy
does not have all of the potentially negative baggage for other probate assets.
In fact, there is a good argument that doing
so can be a good decision in certain circumstances. You would need to consult with an experienced
Tennessee estate planning attorney to discuss your specific circumstance
more. For a
listing of assets that are probate assets, read this article here.
Follow me on Twitter at @jasonalee for updates from the
Tennessee Wills and Estates blog.
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Posted on Sep 2 2013 10:37PM by Attorney, Jason A. Lee
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T.C.A.
§ 30-2-608 allows any individual interested in a deceased person's estate
to file notification with the court that an incomplete inventory of the
deceased individual's assets was provided to the court. Specifically, T.C.A.
§ 30-2-608 provides as follows:
Any person
interested in any deceased person's estate as legatee, distributee, surviving
spouse, creditor, or otherwise, may, at any time before final settlement of the
estate, show by proof that the personal representative has not returned a
complete inventory, and the article or articles omitted in the inventory shall
be debited to the personal representative at the value of the article or
articles, unless the personal representative can show a sufficient reason for
leaving the article or articles out of the inventory.
As a result, any of the individuals listed
in this statute (which is basically anyone who would care) can establish by
specific proof that a complete inventory has not been provided to the court and
that this should be corrected. Sometimes
this may occur because the personal representative does not have specific
information about the deceased person's assets that other individuals may
have. On the other hand, sometimes this
may occur because the personal representative may leave off certain assets on
purpose for inappropriate reasons. Regardless,
the statute provides an avenue for individuals who believe a complete inventory
was not provided to contest the inventory submitted by the personal
representative. This can be important to
determine the actual size of the estate for distribution and payment of creditors.
Follow me on Twitter at @jasonalee for updates from the Tennessee Wills and Estates blog.
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Posted on Jul 1 2013 9:50PM by Attorney, Jason A. Lee
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Tennessee law requires the provision of
notice to debtors and creditors after an individual dies and a probate estate
is opened. T.C.A.
§ 30-2-306 requires the personal representative (the Executor, Executrix or
Administrator of the probate estate) to provide notice to all creditors with
"whom the personal representative has actual knowledge or who are
reasonably ascertainable by the personal representative, at the creditor's last
known address." The complete
requirements are listed in T.C.A.
§ 30-2-306(d) which provides as follows:
(d) In addition,
it shall be the duty of the personal representative to mail or deliver by other
means a copy of the published or posted notice as described in subsection (b)
to all creditors of the decedent of whom the personal representative has actual
knowledge or who are reasonably ascertainable by the personal representative,
at the creditors' last known addresses. This notice shall not be required where
a creditor has already filed a claim against the estate, has been paid or has
issued a release of all claims against the estate.
Additionally, the
clerk of the court where the estate is administered is required to provide
public notice to creditors and debtors within 30 days after the issuance of
letters testamentary or administration. This
notice is to be provided in a newspaper or public place pursuant to the
statute. The specifics of T.C.A. §
30-2-306(a) are as follows:
(a) Except as
provided in subsection (e), it is the duty of the clerk of the court in which
an estate is being administered, within thirty (30) days after the issuance of
letters testamentary or of administration, to give, in the name of the personal
representative of the estate, public notice of the personal representative's
qualification as such by two (2) consecutive weekly notices published in some
newspaper of the county in which letters testamentary or of administration are
granted, or, if no newspaper is published in that county, by written notices
posted in three (3) public places in the county, one (1) of which shall be
posted at the usual place for posting notices at the courthouse.
This statute makes
it clear that it is the duty of the personal representative to identify known
creditors and to investigate potential creditors of the estate. This does not require a search to the ends of
the earth, but does require a reasonable...
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Posted on Jun 8 2013 10:12PM by Attorney, Jason A. Lee
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The recent Tennessee Court of Appeals
decision of In Re: The
Estate of Rosalynn Karesh, No. W2012-00181-COA-R3-CV, 2012 WL 6562025 (Tenn.
Ct. App. December 17, 2012) discussed the impact of untimely exceptions
or objections to a creditor's claim. The
court noted that under T.C.A.
§ 30-2-314(a) the estate has a right to file written objections to any
creditor claim that is filed against the estate. Karesh at 4,
5. This statute, T.C.A.
§ 30-2-314(a) specifically mandates that, “each exception shall include a
reasonably detailed explanation of the ground or grounds upon which the person
making such exception intends to rely.” Karesh at 5.
The court noted that the failure to timely
file an exception to a creditor claim has consequences specifically, "failure
to except to a claim amounts to an admission of its justness; and the claim
becomes, in effect, a judgment against the estate at the end of the statutory
period." Karesh at 4
(citing, Needham v. Moore, 292 S.W.2d 720, 723 (Tenn. 1956)). As a result, this is a very important
requirement.
In this Karesh
case, the estate only filed objections to a specific creditor's claims on the
basis the claims were untimely but did not provide any specific objections to
the actual merits of the claims. Karesh at 4,
5. The estate did send a letter
to the creditor discussing some objections but it was not filed with the Court
within the appropriate time frame required under the statute. As a result, the only objections timely filed
with the Court were based on the alleged untimeliness of the creditor claim
(which the court rejected). As a result,
the Appellate Court found that a written letter of substantive objections that
was not filed with the court until after the time period passed for
objections is not sufficient to properly raise objections to the credito...
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Posted on May 21 2013 9:54AM by Attorney, Jason A. Lee
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Under certain circumstances, TennCare must be
provided with notice by the personal representative of the death of an
individual in the context of a probate estate in Tennessee. T.C.A.
§ 30-2-301 provides that within sixty days of a personal representative's
appointment as the personal representative, they are required to execute and
file an affidavit with the clerk that the Bureau of TennCare has been notified
of the decedent's death if they are older then 55 years of age or are a
TennCare recipient. T.C.A. §
30-2-301(b)(5) provides as follows:
(5) Within the
sixty-day period, the personal representative shall execute and file with the
clerk of the court an affidavit that the bureau of TennCare has been notified
of the decedent's death pursuant to § 71-5-116.
T.C.A. § 71-5-116(c)(2) provides as
follows:
(c)(2) Before any probate estate may be closed pursuant to title 30, with
respect to a decedent who, at the time of death, was enrolled in the TennCare
program, the personal representative of the estate shall file with the clerk of
the court exercising probate jurisdiction a release from the bureau of TennCare
evidencing either:
(A) Payment of all medical assistance benefits, premiums, or other costs
due from the estate under law;
(B) Waiver of the bureau's claims; or
(C) A statement from the bureau that no amount is due.
Therefore, it is
clear that when someone is enrolled in TennCare at the time of their death, a
release must be filed with the court in the probate estate stating that
TennCare has been paid all it is owed from the estate; or that TennCare
has waived any claim; or that TennCare has stated that no money is
owed.
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