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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 Oct 26 2014 7:45PM by Attorney, Jason A. Lee
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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...
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Posted on Jun 29 2014 10:06PM by Attorney, Jason A. Lee
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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...
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Posted on Mar 7 2014 4:17PM by Attorney, Jason A. Lee
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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...
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Posted on Dec 8 2013 11:38PM by Attorney, Jason A. Lee
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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:
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Posted on Oct 6 2013 9:39PM by Attorney, Jason A. Lee
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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.
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Posted on Jun 3 2013 8:54PM by Attorney, Jason A. Lee
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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.
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