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

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

Can a Tennessee Power of Attorney Give Themselves a Gift?

One issue that comes up on occasion in Tennessee is whether an attorney-in-fact, under a Power of Attorney, can give gifts to themselves as power of attorney.  A recent Tennessee Court of Appeals’ decision, In Re: Conservatorship of Alfonso B. Patten, No. M2012-01078-COA-R3-CV, 2014 WL 4803146 (Tenn. Ct. App. 2014), discusses a situation where an attorney-in-fact gave herself significant gifts of money and real estate by utilizing the Power of Attorney of her father (the “Ward”).  These gifts were given with “no consideration” which means she did not pay anything for the “gifts”. 

The question, therefore, was whether the Power of Attorney document language allowed the attorney-in-fact to give gifts to herself and her husband.  Under Tennessee law, an attorney-in-fact can give gifts to himself or herself if the plain language in the Power of Attorney document provides for such a power in a clear and unambiguous way.  In this case, the attorney-in-fact argued that the Power of Attorney document provided clear language giving authority to give gifts.  Additionally, under T.C.A. § 34-6-110(a)(2), provides that “if the attorney-in-fact has the authority to make gifts, he or she may make gifts of the principal’s property in accordance with the principal’s personal history of making or joining in the making of lifetime gifts.”  The Court in the Patten case at issue found that the pattern of small gifts over the years by the Ward did not translate into a pattern of giving at the level of gifts that were given in this situation (totaling property in excess of $1,000,000.00).  As a result, in this particular case the Court found the Power of Attorney document did not provide explicit authority to give gifts and the gifts that were given were not in accordance with the prior actions of the father. 

The bottom line in Tennessee is that it is very risky to give gifts to yourself by using a Power of Attorney.  The gift giving power must be explicitly authorized in the Power of Attorney document or you run a great risk of being found to have breached the fiduciary duty or even of stealing (conversion) from the Ward.  If you have a...

In Tennessee Should You Add Your Children to Your Bank Accounts When You Need Assistance Later in Life?

A troubling amount of elderly individuals in Tennessee add one or more of their children to their bank accounts as joint owners with right of survivorship in order to have them assist in paying bills and taking care of other matters late in life.  This is certainly a tempting option because it can be a simple way to allow someone to help an elderly individual late in life so their financial matters are taken care of by someone.  However doing this is fraught with danger.

When an individual is added to a bank account with right of survivorship, then upon the elderly individuals passing, the entire account passes to them 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). 

Another major problem is if the “co-owner” on your account obtains a judgment against them by a creditor then the creditor can often collect against your account.  This is a significant risk.  For instance, if one of your children gets into an automobile accident and unfortunately severely injures someone but they have insufficient insurance coverage to pay for the damages, then the injured party could obtain a judgment against them and execute against your account to pay the judgment. 

Additionally, the account will be considered part of your child’s assets for purposes of bankruptcy or other purposes.  As a result, there is a tremendous risk in adding even responsible, financially stable individuals as owners of your bank account.  I recommend doing this in almost all circumstances because the downside consequences are so significant.  There are other options like having a properly completed Power of Attorney completed that will allow your children to assist you with your finances later in life.  Also, if you are trying to avoid probate for those accounts, then you can list them as a P...

How Much Does it Cost to Have a Will Drafted in Tennessee?

One of the most frequent questions I am asked is “How much does it cost to have an attorney draft a will in Tennessee?”  People often believe that obtaining necessary and important documents such as a Will, Power of Attorney, Healthcare Power of Attorney and Living Will is a very expensive and complicated process.  This is absolutely not true!  Many people are surprised when I tell them the actual cost of having these documents prepared.  With this in mind, I have decided to share my pricing for these documents so that people can be properly informed on the actual costs to have an estate planning package drafted by an attorney.  The cost is very insignificant when compared to the importance of having your final affairs in order. 

For the vast majority of individuals, my cost to prepare an estate package including a Will, Power of Attorney, Healthcare Power of Attorney and Living is a flat rate of $450.00.  I charge this same flat rate for both single individuals and married couples.  This is the total charge, which means for a married couple, a total of eight documents would be prepared for $450.00. 

As I have previously indicated in my blog, all of these documents are essential for everyone to have.  This price assumes everything, with the exception of signing the documents, can be done by email and telephone for the exchange of information and discussion about estate planning decisions to be made based on the individual circumstances.  This is generally a very easy process.  I have detailed questionnaires that you, and if applicable, your spouse can complete on your own time to make all of the necessary decisions.  You can email, fax or mail the questionnaires back to me once complete.  From there, I draft the estate planning documents.  I then send them to you for approval and will address any questions you may have.  Once the documents are in final form, a meeting is scheduled at my office in Nashville, Tennessee, to sign (aka “execute”) the documents.  The execution of all the documents with a notary and witnesses takes approximately 45 minutes.

Some people prefer to meet with me in person to discuss strategy and decisions before the docu...

Is a Confidential or Fiduciary Relationship Automatically Found in the Context of a “Legal Relationship” or a “Family Relationship” in Tennessee?

The Tennessee Court of Appeals decision of Tamala Teague v. Garnette Kidd, No. E2011-02363-COA-R3-CV, 2012 WL 5869637 (Tenn.Ct.App. 2012) discussed confidential relationships under Tennessee and what duties arise in such relationships.  This is important in the context of Tennessee estate law because often disputes arise about certain transactions around the time of death.  Claims of undue influence arise because of these transactions especially when one party has a power of attorney over an elderly individual. 

A confidential relationship is a relationship where confidence is placed by one in the other and the recipient of that confidence is the dominant personality, with the ability, because of that confidence, to influence and exercise dominion over the weaker or dominated party.  In general terms, it is any relationship that gives one person the ability to exercise dominion and control over another.  The burden of proof regarding a confidential relationship rests upon the party claiming the existence of such a relationship.  Confidential relationships can assume a variety of forms, and thus the courts have been hesitant to define precisely what a confidential relationship is.

Confidential relationships generally arise in two situations: (1) “legal relationships” and (2) “family and other relationships.”  In the “legal relationships” context, a confidential relationship arises when there is some legal connection between the dominant party and the weaker party, such as when a dominant party is granted a power of attorney.  Indeed, “a confidential relationship arises as a matter of law when an unrestricted power of attorney is granted to the dominant party.” Id. (emphasis added). In contrast, “[f]amily and other relationships” do not necessarily give rise to a confidential relationship per se; therefore, to establish a confidential relationship in this situation, contestants must prove the elements of “domination and control” in order to establish that the free will of the weaker party was destroyed and that the will of the dominant party was substituted. 

Teague at 8 (citations omitted). 

LEGAL RELATIONSHIP:

Does a power of attorney create a fiduciary relationship between the grantor and the attorney-in-fact?

Under Tennessee law a power of attorney document is available to provide an individual with great powers to handle many aspects of the grantor’s life.  Specifically, T.C.A. § 34-6-109 outlines the powers of a power of attorney under Tennessee law.  Usually this is used when an individual becomes incompetent and lacks mental capacity to make decision for themselves.

The recent Tennessee Court of Appeals decision of Tamala Teague v. Garnette Kidd, No. E2011-02363-COA-R3-CV, 2012 WL 5869637 (Tenn.Ct.App. 2012) discussed the relationship between the grantor of a power of attorney and the attorney-in-fact.  The Tennessee Court of Appeals found:

The execution and exercise of a power of attorney establishes a fiduciary relationship between the attorney in-fact and the grantor of the power.  The fiduciary is obligated to deal with the property of his (or her) principle in the utmost good faith.  The duties of loyalty and honesty are also a part of a fiduciaries obligation.  In Tennessee, a presumption of undue influence arises when the dominate party in a fiduciary relationship receives a benefit from the other party.  This presumption may be rebutted only by clear and convincing evidence of the fairness of the transaction."

Teague at 7.  (Citations omitted).  As a result, when someone is the "attorney-in-fact" as established in a power of attorney document by a grantor, it is very important to consider the fiduciary responsibilities in this relationship.  This is especially true when there is any transaction between the two that benefits the attorney-in-fact.  Tennessee law creates a presumption that in this circumstance when the dominant party (the attorney-in-fact) receives a benefit from the granting party then such a transaction is presumed to be the result of undue influence.  If this occurs, this can be considered a breach of the fiduciary relationship.

Under Tennessee law, what is a durable power of attorney document – and do I need to have one?

A durable power of attorney document is a very important tool available in Tennessee to assist people in designating people who have power to act as their attorney in fact in various situations.  It is an important part of proper estate planning.  The durable power of attorney can become effective immediately upon execution.  This would allow the designated “attorney in fact” to act for the principal in various situations discussed more fully below (like signing legal documents on the principal’s behalf). 

The durable power of attorney can also be drafted in such a way that it only takes effect upon the disability or incapacity of the principal.  This can be very important because it allows many people to avoid the cost of Tennessee conservatorship proceedings if they ever become incapacitated due to dementia, Alzheimer’s or some other problem.  If there is no power of attorney document, often a conservatorship proceeding is required to obtain the powers that could have otherwise been provided in a properly executed power of attorney document.

A durable power of attorney document is defined by Tennessee statute in T.C.A. § 34-6-102 as follows:

A durable power of attorney is a power of attorney by which a principal designates another as the principal's attorney in fact in writing and the writing contains the words “This power of attorney shall not be affected by subsequent disability or incapacity of the principal,” or “This power of attorney shall become effective upon the disability or incapacity of the principal,” or similar words showing the intent of the principal that the authority conferred shall be exercisable, notwithstanding the principal's subsequent disability or incapacity.

This document basically gives another individual the power to act just like they were the principal who granted the powers to the attorney-in-fact.