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Topic: Life Insurance

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]
  
 

What Happens When an Insured Under a Life Insurance Policy and a Beneficiary Die Simultaneously in Tennessee?

Posted on Jul 31 2016 4:25PM by Attorney, Jason A. Lee

Sometimes an individual who has a life insurance policy dies at the same time as a beneficiary.  Obviously, this does not happen very often, but it does happen on occasion.  Most often, when this occurs, it is simply just impossible to determine who actually died first.  In Tennessee, we have a statute that addresses this exact situation.  T.C.A. § 31-3-105 provides that when an insured and beneficiary under the policy die simultaneously, then the proceeds of that policy are distributed as if the insured under the policy had actually survived the beneficiary.  The actual language of the statute is as follows:

 

Where the insured and the beneficiary in a policy of life or accident insurance have died and there is no sufficient evidence that they have died otherwise than simultaneously, the proceeds of the policy shall be distributed as if the insured had survived the beneficiary.

 

As a result, the life insurance money does not go to the beneficiary who died at the same time under these circumstances.  Instead, the money is distributed pursuant to alternative means under the life insurance policy (such as contingent beneficiaries or even into the estate of the insured).  As a result, if you are involved with a situation where the life insurance policyholder and a beneficiary die at the same time, you should consult a Tennessee attorney who is experienced in handling life insurance issues.

 

Follow me on Twitter at @jasonalee for updates from the Tennessee Wills and Estates Blog.
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Confusion on When a Tennessee Probate Estate Should be Opened

Posted on May 17 2015 6:34PM by Attorney, Jason A. Lee

I get a lot of interesting questions when I tell people that I practice Probate law in Tennessee.  One of the things that is most confusing to people is how to know when an actual estate needs to be opened for their loved one.  As a general rule, Tennessee probate estates only need to be opened when there are probate assets.  Probate assets include bank accounts that are not joint and do not have any “pay on death” or “transfer on death” designations.  Other probate assets include real estate when there is no joint, right of survivorship, co-owner.  Probate assets can also include life insurance policies and retirement accounts that do not have a beneficiary or that list the estate as the beneficiary.  These are the most common probate assets that can require an estate to be opened in Tennessee.


A lot of family members who do not receive anything from an estate can be very confused by these rules.  They are often upset because they never see a will or any probate filings.  What I tell them is that if all of the assets are disposed of by other methods (joint ownership of real property, beneficiary designations on accounts or joint ownership of accounts) then they may never see the will or any details concerning what happened to the assets.  There is no central database that allows people to find this information out simply by searching (however, when an estate is opened, it is public record).  Banks, life insurance companies and mutual fund companies will simply quietly disperse the funds to the beneficiaries pursuant to the wishes of the decedent assuming the information they are provided matches their records and policies.


All of this being said, this does not mean that on occasion, sometimes people manipulate the system and get access to accounts and assets improperly.  If you suspect this, often the only thing you can do is to try to force the issue by opening an estate and have an administrator appointed (or be the executor) so that you can investigate and determine if things were handled correctly.  This costs money but I would highly recommend you hire an attorney to assist wit...



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TAGS: Life Insurance, Retirement plans - 401k etc., Real Estate, Probate Assets, Tennessee Probate Law Comments [0]
  
 

Does Divorce Automatically Revoke the Life Insurance Beneficiary Status of the Ex-Spouse in Tennessee?

Posted on Sep 28 2014 4:18PM by Attorney, Jason A. Lee

One issue that comes up on occasion in Tennessee is whether a life insurance policy beneficiary designation is revoked automatically by a divorce.  The short answer to this question is no, a divorce does not revoke a life insurance beneficiary designation.  This is the default rule in Tennessee. 

 

Often life insurance companies will deny life insurance payouts to ex-spouses on the basis that they assert a divorce revokes the beneficiary designation.  That is not the rule in Tennessee.  In fact, there is a Tennessee Supreme Court case that has addressed this issue. See Bowers v. Bowers, 637 S.W.2d 456 (Tenn. 1982). 

 

Many life insurance companies that write policies in Tennessee are actually located outside of the State of Tennessee.  They often have non-Tennessee attorneys review life insurance policies and the beneficiary status when there is a divorce.  Some of these attorneys do not know the Tennessee law on this issue.  If you receive a denial of life insurance as an ex-spouse when you are still listed as a beneficiary on the life insurance policy, you should hire an attorney to assist you with obtaining these life insurance benefits.  Obviously, every fact situation is different, but the general rule in Tennessee is that the divorce does not revoke the life insurance beneficiary designation. 

 

Follow me on Twitter at @jasonalee for updates from the Tennessee Wills and Estates blog.
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Is a 401k Distributed Pursuant to your Will and is it Part of a Probate Estate in Tennessee?

Posted on Mar 21 2014 12:45PM by Attorney, Jason A. Lee

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

In Tennessee is Life Insurance a Probate Asset that Requires a Probate Proceeding?

Posted on Jan 11 2014 5:39PM by Attorney, Jason A. Lee

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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TAGS: Life Insurance, Debts of Estate, Creditor claims, Probate Assets, Tennessee Probate Law Comments [0]
  
 

Tennessee Inheritance Tax – Are Life Insurance Policies Included in the Estate of the Decedent for Tennessee Inheritance Tax Purposes?

Posted on Oct 20 2013 10:33PM by Attorney, Jason A. Lee

Under T.C.A. § 67-8-306, life insurance policies are included in the gross estate of the decedent when calculating the size of the estate of inheritance tax purposes.  This is true whether the policies of insurance are payable to named beneficiaries or to the decedent’s estates.  This is a general rule and the complete statute is as follows:

 

(a) If the decedent was a resident of this state, there shall be included in the gross estate the proceeds of insurance policies payable to named beneficiaries, or to the decedent's estate, or in such manner as to be subject to claims against the decedent's estate and to distribution as a part thereof.

(b) This section shall include the proceeds of insurance policies commonly known as “paid-up contracts” or “investment contracts” or “annuity contracts” or similar types or forms of policies, the surrender value of which was subject to the control of the decedent prior to death.

(c) Where life insurance, the proceeds of which are under the control of the decedent, is left by the decedent in such manner that the proceeds thereof cannot be subjected to the payment of the decedent's debts and where the proceeds of such insurance are received by beneficiaries thereof and are not subjected to the debts of the decedent, the fact that the decedent may have been insolvent and that a portion of the decedent's debts may remain unpaid shall not affect the liability for inheritance tax upon such insurance.

 

A lot of people forget to consider life insurance policies when making a determination of potential estate tax liability.  This must be taken into consideration in Tennessee.

 

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TAGS: Life Insurance, Tennessee Inheritance Tax, Taxes, Tennessee Probate Law Comments [0]
  
 

Tennessee law prevents people from inheriting any property or life insurance from a person if they were responsible for their death.

Posted on Jul 21 2013 3:25PM by Attorney, Jason A. Lee

Tennessee has a statute which governs whether an individual can inherit any property or recover any life insurance from a deceased individual if they were responsible for killing that deceased individual.  T.C.A. § 31-1-106 provides as follows:

 

Any person who kills, or conspires with another to kill, or procures to be killed, any other person from whom the first named person would inherit the property, either real or personal, or any part of the property, belonging to the deceased person at the time of the deceased person's death, or who would take the property, or any part of the property, by will, deed, or otherwise, at the death of the deceased, shall forfeit all right in the property, and the property shall go as it would have gone under § 31-2-104, or by will, deed or other conveyance, as the case may be; provided, that this section shall not apply to any killing done by accident or in self-defense.

 

It is important to note that this statute does not apply to any killing that was done by accident or in self-defense.  However, any killing beyond “accident” or “self-defense” prevents an individual from inheriting from the deceased.  It also prevents that person from basically obtaining any benefit as a result of the deceased individual's death as provided in this statute.  This would include obtaining property by Right of Survivorship in a joint ownership situation.

 

Follow me on Twitter at @jasonalee for updates from the Tennessee Wills and Estates blog.
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What types of assets are not probate assets in Tennessee?

Posted on Feb 19 2013 10:32AM by Attorney, Jason A. Lee

It is important to determine what assets are probate assets and what assets are not probate assets to determine whether an estate needs to be probated under Tennessee Law.  It is important to plan ahead in order to keep as many assets out of the probate process if possible.  Assets that do not pass through the probate process include the following:

 

1.         Any 401k plan, IRA plan or any other type of retirement plan that designates a specific beneficiary (other than where the beneficiary is designated as the decedent's estate).

 

2.         Any asset including 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.

 

3.         Any asset of any kind that are titled in the decedent's name with a "transfer on death" or "pay on death" designation for a specific beneficiary other than the decedent's estate.

 

4.         Any life insurance policy which has a specific beneficiary designated other than the estate of the deceased individual.

It is important to determine what assets are probate assets and what assets are not probate assets in order to determine whether a will needs to be probated under Tennessee law.  A Tennessee probate attorney should be consulted to determine how to make this decision after an individual dies.  Additionally certain decisions can be made before death in order to reduce or eliminate what assets pass through the probate process.

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TAGS: Life Insurance, Retirement plans - 401k etc., Real Estate, Probate Assets, Tennessee Probate Law Comments [0]
  
 

In Tennessee when are you required to go through a court supervised probate process to handle an estate?

Posted on Feb 18 2013 1:56PM by Attorney, Jason A. Lee

One of the most important questions when considering how to handle a deceased person's estate is whether a formal court monitored probate process is required.  T.C.A. § 30-1-101 provides that "no person shall presume to enter upon the administration of any deceased person's estate until the person has obtained letters of administration or letters testamentary."  Essentially, this statute prohibits the administration of an estate outside of the formal court probate process for someone who died who had assets that are commonly referred to as "probate assets". 

 

The next question therefore is what "probate assets" would likely require the formal probate administration process that is required under Tennessee law.  Examples of key "probate assets" are as follows:

 

1.         Any 401k, IRA, or any other kind of retirement plan that designates the estate of the decedent as a beneficiary.

 

2.         Any life insurance policy of the decedent that lists the estate as a beneficiary.

 

3.         Any asset that is titled in the decedent's name without any designation of a beneficiary or without joint ownership with another individual.

 

4.         Any asset that is titled in the decedent's name that has anther individual listed on the title as "tenants in common".

It is very important when someone dies to carefully evaluate whether the court administrated probate process is required under Tennessee law in order to properly distribute the assets of the deceased.  This is where the advice of a probate attorney is very valuable to handle your specific situation.  Contact me if you want to discuss this or any other issue involving the probate of an estate.

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TAGS: Probate Process, Life Insurance, Retirement plans - 401k etc., Real Estate, Probate Assets, Tennessee Probate Law Comments [0]
  
 
Author

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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