Tennessee Inheritance Tax – Is jointly held property considered part of the decedent’s taxable estate under Tennessee law?

Under Tennessee law, jointly held property can be considered part of the deceased individual’s taxable estate.  T.C.A. § 67-8-305 discusses property transfers that occur upon someone’s death by right of survivorship (often under tenants by the entirety or tenancy by the entirety) or any payable on death accounts including joint accounts held in multiple people’s names.  Under T.C.A. § 67-8-305, if such transfers occur between husband and wife at the death of the decedent then only one half of the value of the account or property is considered a taxable transfer.  However, if the accounts or property are owned jointly by individuals who are not husband and wife then the “entire value of any such property shall be deemed to have been transferred from the decedent to the survivor” and therefore is subject to the Tennessee inheritance tax. 

Additionally, under subsection (a)(2) if the survivor who inherits from the decedent who had a joint account or owned joint property with the decedent actually contributed money towards the account or purchase, then that amount is deducted from the value that is considered to be part of the taxable estate.  In other words, if the survivor deposited money in the bank account or paid for part of the property that was jointly held, then that amount will reduce the taxable estate of the decedent.

T.C.A. § 67-8-305 provides in its entirety as follows:

(a) Whenever any property was held jointly by the decedent and one (1) or more persons as tenants by the entirety or otherwise, or was deposited in banks or other depositories or institutions in the joint names of the decedent and one (1) or more other persons and was payable to one (1) or more, or to the survivor or survivors, so that, upon the death of the decedent, the survivor or survivors became entitled to the immediate possession, ownership or enjoyment of such property, the entire value of any such property shall be deemed to have been transferred from the decedent to the survivor or survivors, and such transfer shall be subject to the inheritance tax imposed by parts 3-5 of this chapter, except:

In Tennessee when is a surviving spouse required to make an election to receive an elective share against the estate?

A surviving spouse can choose to receive an elective share (see prior post describing the details of an elective share under Tennessee law) of the decedent's property by filing a notice with the court and delivering the notice to the personal representative.  The surviving spouse must file a petition for an elective share within nine months after the date of the death.  T.C.A. § 31-4-102(a)(1) provides as follows:

(a)(1) The surviving spouse may elect to take the spouse's elective share in decedent's property by filing in the court and mailing or delivering to the personal representative, if any, a petition for the elective share within nine (9) months after the date of death.

Additionally, an extension of this time limit is provided in the statute if there is litigation pending about the title of the surviving spouse to property devised or bequeathed by the will such that an elective share determination could not be made with sufficient information.  If this type of litigation exists then the surviving spouse has an additional year from the date of the probate of the will within which to elect.  Additionally, the court can extend that date further due to the litigation if requested.  T.C.A. § 31-4-102(a)(2) provides as follows:

(2) When the title of the surviving spouse to property devised or bequeathed by the will is involved in litigation pending so that an election to take the elective share cannot be advisedly made, the survivor shall have an additional year from the date of the probate of the will within which to elect; provided, that the court may upon a proper showing further extend the time to meet the exigency of litigation, not concluded, and, that application for allowance of additional time, in either case, be made to the court, for record of its action thereon.

The surviving spouse may also withdraw a demand for an elective share at any time for the entry of a final determination by the court under T.C.A. § 31-4-102(c).  Obviously factual circumstances can change as the estate moves through the Tennessee probate process. ...

In Tennessee when an individual dies without a will (intestate) and there is no surviving spouse, how is the property distributed?

If an individual dies without a will (intestate) in Tennessee, T.C.A. § 31-2-104 governs how the estate of the deceased is split up among the heirs.  The Tennessee legislature has set up a statutory structure for the distribution of an estate for someone who dies without a will.

T.C.A. § 31-2-104(b) provides as follows:

(b) The part of the intestate estate not passing to the surviving spouse under subsection (a) or the entire intestate estate if there is no surviving spouse, passes as follows:

(1) To the issue of the decedent; if they are all of the same degree of kinship to the decedent they take equally, but if of unequal degree, then those of more remote degree take by representation;

(2) If there is no surviving issue, to the decedent's parent or parents equally;

(3) If there is no surviving issue or parent, to the brothers and sisters and the issue of each deceased brother and sister by representation; if there is no surviving brother or sister, the issue of brothers and sisters take by representation; or

(4) If there is no surviving issue, parent, or issue of a parent, but the decedent is survived by one or more grandparents or issue of grandparents, half of the estate passes to the paternal grandparents if both survive, or to the surviving paternal grandparent or to the issue of the paternal grandparents if both are deceased, the issue taking equally if they are all of the same degree of kinship to the decedent, but if of unequal degree those of more remote degree take by representation; and the other half passes to the maternal relatives in the same manner; but if there is no surviving grandparent or issue of grandparent on either the paternal or maternal side, the entire estate passes to the relatives on the other side in the same manner as the half.

T.C.A. § 31-2-104(a) (the preceding section in this statute) discusses how property is distributed when there is a surviving spouse.  Subsection (b) deals with the situation where there is no surviving spouse.  The order of priority based on the above statute (when there is no surviving spouse) is basically as follows:

What is the elective share for a surviving spouse under Tennessee law?

A surviving spouse of an intestate decedent (a person who died without a will) or a surviving spouse who elects against a will (testate situation) has a right of election under T.C.A. § 31-4-101.  Specifically, this statute provides that depending on the length of the marriage, the surviving spouse can elect to receive a certain percentage of the net estate instead of receiving what is provided for in the will or in an intestate situation.  T.C.A. § 31-4-101(a) provides as follows:

(a)(1) The surviving spouse of an intestate decedent who elects against taking an intestate share, or a surviving spouse who elects against a decedent's will, has a right of election, unless limited by subsection (c), to take an elective-share amount equal to the value of the decedent's net estate as defined in subsection (b), determined by the length of time the surviving spouse and the decedent were married to each other, in accordance with the following schedule:

Under Tennessee law can a fraudulent conveyance that is made to defeat the elective share option of the "surviving spouse" be voided?

Under Tennessee law any conveyance by the decedent that is made in a fraudulent manner to children or any other individual in order to defeat the "surviving spouse’s distributive or elective share" is voidable at the option of the surviving spouse.  This situation can arise where an individual knows he or she is going to die soon, and therefore conveys property or other assets to another individual in order to try to remove it from the estate so it would not go to the surviving spouse.  Since the spouse has a right to certain benefits under Tennessee Law including an elective share, such a distribution that is done for a fraudulent purpose can be voided.

T.C.A. § 31-1-105 is the Tennessee statute that basically prevents an individual from successfully transferring assets prior to death in order to reduce the value of the estate that is subject to the elective share option under Tennessee law.  T.C.A. § 31-1-105 provides as follows:

Any conveyance made fraudulently to children or others, with an intent to defeat the surviving spouse of the surviving spouse's distributive or elective share, is, at the election of the surviving spouse, includable in the decedent's net estate under § 31-4-101(b), and voidable to the extent the other assets in the decedent's net estate are insufficient to fund and pay the elective share amount payable to the surviving spouse under § 31-4-101(c).

As a result, if gifts or conveyances are made to children or any other individual, those gifts or conveyances can be voided by the court if requested by the surviving spouse.  This will be done to protect the surviving spouse's entitlement to an elective share.  The elective share of a surviving spouse will be discussed in a subsequent post however, the main part of the statute, T.C.A. § 31-4-101(a) provides as follows:

If an individual dies without a will (intestate) in Tennessee and they leave a surviving spouse and children, what happens to the decedent’s property?

When an individual dies without a will (intestate) Tennessee statutes govern the distribution of their estate including all of their assets and property.  T.C.A. § 31-2-104 provides that if there is a surviving spouse then the distribution is as follows:

(a) The intestate share of the surviving spouse is:

(1) If there is no surviving issue of the decedent, the entire intestate estate; or

(2) If there are surviving issue of the decedent, either one-third (1/3) or a child's share of the entire intestate estate, whichever is greater.

Surviving Spouse only (with no surviving “issue”):

As a result, if there is a surviving spouse with no “issue” from the decedent then the surviving spouse takes the entire estate.  The next question is, what does it mean to have surviving “issue” of the decedent?  Issue is defined in T.C.A. § 31-1-101 as follows:

(6) “Issue” of a person means all the person's lineal descendants, adopted as well as natural born, of all generations, with the relationship of parent and child at each generation being determined by the definitions of child and parent contained in this title;

This includes children but it also includes grandchildren (and also others but children and grandchildren are the most common examples of “issue”). 

Surviving Spouse with surviving “issue”:

If the decedent had surviving “issue” then the surviving spouse gets a one-third share of the estate or a child's share of the estate, whichever is greater.  This means that if there is a surviving spouse and one chi...

What is the "year's support” allowance under Tennessee law for a surviving spouse or minor child?

The surviving spouse of an intestate individual who dies (this is an individual who dies without a will) is entitled to a “support allowance” totaling one year of support after the death of the spouse.  This option is also available to a surviving spouse who elects against the deceased's will (also called an elective share).  T.C.A. § 30-2-102(a) provides as follows:

(a) In addition to the right to homestead, an elective share under title 31, chapter 4, and exempt property, the surviving spouse of an intestate, or a surviving spouse who elects to take against a decedent's will, is entitled to a reasonable allowance in money out of the estate for such surviving spouse's maintenance during the period of one (1) year after the death of the spouse, according to the surviving spouse's previous standard of living, taking into account the condition of the estate of the deceased spouse. The court may consider the totality of the circumstances in fixing the allowance authorized by this section, including assets that may have passed to the spouse outside probate.

As a result, the court considers all of the circumstances surrounding the estate as well as any money the spouse received outside of the probate estate to determine the amount of the “year’s support” in Tennessee.  The court also takes into consideration the spouse’s standard of living to determine the appropriate amount of the support allowance.

It is important to note that this statute also provides that if the individual who died does not have a surviving spouse but instead is survived by minor unmarried children, then the support allowance (“year’s support”) can be provided to the unmarried minor children in Tennessee.  This is provided for in T.C.A. § 30-2-102(b) which states as follows:

(b) The allowance so ordered shall be made payable to the surviving spouse, unless the court finds that it would be just and equitable to make a division of it between the unmarried minor children. If there is no surviving spouse, the allowance shall be made to the unmarried minor children.

Under T.C.A. § 30-2-104 the death of the surviving spouse within the one year period after the surviving spouse elects to receive the “year's support” allowance under T.C.A. § 30-2-102 does not affect the surviving spouse's entitlement to this money.  T.C.A. § 30-2-104 provides: 

Is someone who is divorced, separated or had their marriage annulled from a decedent considered a "surviving spouse" under Tennessee law?

It is important to determine who qualifies as a surviving spouse under Tennessee law for purposes of certain statutes that provide surviving spouses with substantial benefits and options (including elective share, homestead, year's support etc.).  T.C.A. § 31-1-102 provides that a person who is divorced from a deceased individual is not considered a "surviving spouse" under Tennessee law (assuming they have not remarried post divorce and are married at the time of death).  The same is true for an annulled marriage.  An individual whose marriage was annulled from a decedent is not considered a "surviving spouse" under Tennessee law. 

A decree of separation that does not actually terminate the status of husband and wife is a different matter.  The decree of separation is not considered a divorce or final and therefore that individual is still a "surviving spouse" under Tennessee law. 

T.C.A. § 31-1-102 provides in its entirety as follows:

(a) A person who is divorced from the decedent or whose marriage to the decedent has been annulled is not a surviving spouse unless, by virtue of a subsequent marriage, the person is married to the decedent at the time of death. A decree of separation that does not terminate the status of husband and wife is not a divorce for purposes of this section.

(b) For purposes of this title, a surviving spouse does not include:

(1) A person who obtains or consents to a final decree or judgment of divorce from the decedent or an annulment of their marriage, which decree or judgment is not recognized as valid in this state, unless they subsequently participate in a marriage ceremony purporting to marry each to the other, or subsequently live together as husband and wife;

(2) A person who, following a valid or invalid decree or judgment of divorce or annulment obtained by the decedent, participates in a marriage ceremony with a third person; or

(3) A person who was a party to a valid marital dissolution agreement or a valid proceeding concluded by an order purporting to terminate all marital property rights.