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Nashville Estate Administration Law Blog

Pro tips for will creation: Advice you don't commonly hear

Estate planning lawyers give the same advice to their clients over and over again, and when you search for will planning advice on the internet, you find a lot of repetitive information. That's largely because this information is so important, but what about the less-than-commonly-heard advice? A recent article published on Oprah's website, written by Suze Orman, offers something unique in this regard.

Here are some of the pro estate planning tips that Suze Orman revealed:

What is continuous estate planning and why is it important?

Continuous estate planning refers to staying on top of your estate plan to ensure that it doesn't become obsolete. No one's life and no one's family is a static, unchanging entity. People die, people get married, children are born and people get divorced. All of these life changes could necessitate changes to your estate plan to ensure it reflects your current wishes.

Imagine you have been married for 15 years, and you've now decided to get a divorce. Your estate plan, which you drafted five years ago left all of your assets to your soon-to-be ex. If you don't update your current estate plan -- and the beneficiary designations on your insurance and investment accounts -- to remove your ex, your ex could receive the money and wealth you hope to leave to someone else.

Income and capital gains taxes after receiving an inheritance

When it comes to your federal taxes, the IRS will not categorize your inheritance as income -- so you won't have to report it as such. However, some kinds of inheritances will generate income, and the IRS may consider this income to be taxable.

Let's say you receive an IRA or a 401(k) account following the death of your parent. When you take distributions from this account, they could be taxed. Also, if you receive appreciable assets -- like property, stocks or expensive works of art -- you may need to pay off the capital gains taxes that trigger when you sell the property.

The battle over Prince's estate rages on

Estate battles regarding the fortune of late rock star Prince continue. A judge who has been presiding over the Prince estate recently named a new special administer to determine if anyone is liable for the estate's cancellation of a $31 million agreement with Universal Music Group.

The new administrator will be determining whether the Prince estate has cause to file a claim against any individual parties that could be responsible and liable for canceling the music deal. The administrator will also decide if it's in the estate's interests to seek compensation regarding financial losses associated with the matter.

What decisions can a power of attorney make?

Smart estate planners don't simply stop at a last will and testament. Your estate plan will not be complete until you have, at the very least, drafted a power of attorney. Your power of attorney documentation gives a trusted person the authority to make vital decisions on your behalf if you become incapacitated -- perhaps due to an unexpected medical event.

This article will examine the most important decisions that a power of attorney will be able to make on your behalf.

Are there any disadvantages to having a will?

It's amazing -- considering the numerous advantages of creating a last will and testament -- how many Tennessee residents have yet to finalize their estate plans with a will. The general advice regarding the timing of will creation is that you should have finished it yesterday.

As such, as soon as you can get to a local estate planning lawyer to write and finalize your will, the better. However, you may want to keep in mind that last wills and testaments do come with a few disadvantages that your estate planning lawyer can help you minimize.

Parents and kids assume different things about inheritances

If you're a parent, do you assume that you need to leave money and other assets to your kids as an inheritance? This means leaving more than just your home and other assets you naturally control, but actively saving up money to leave to the kids.

If you're a child with aging parents, do you expect to get an inheritance? Are you counting on that money to help pay off the house or to give you a chance to retire early?

What property will I inherit after my spouse passes away?

If you and your spouse do not have a will set, as a spouse, you will receive the marital benefit of assuming sole ownership of your and your deceased spouse's entire marital estate. As for assets that are separate property of your spouse, or assets that do not fall under the marital estate, Tennessee state intestacy laws -- and the probate court -- will govern their distribution.

Considering this, what property will not be classified as part of the marital estate? This property, also known as separate property, includes:

  • Property that the spouses owned themselves before marriage
  • Property bought by a spouse with property that he or she previously owned before marriage
  • Capital gains earned on property that was owned before marriage
  • Civil damage award money
  • Property received as a gift from others

Are your heirs financially irresponsible?

You spent your entire life working hard and managing your income responsibly to amass a sizeable estate. You don't want your heirs to mismanage these assets -- or spend them frivolously -- especially when you spent so much effort to accrue them. The problem is that it's not enough to simply leave a note in your will that says, "Don't spend it all in one place."

Fortunately, if you know that your heirs are bad at managing money, you can take some strategic estate planning steps to manage the money and assets you leave behind for them. The most useful tool in this regard is known as a spendthrift trust. Any Tennessee estate planning lawyer will know how to create a trust, and structure it in a way that reflects the unique situation of your family and heirs.

Worried about your pet parrot? A pet trust can help

Pet trusts have become more and more popular as Tennessee estate planners wish to leave financial assets behind to care for their beloved animals. In most states, however, a pet trust will only remain valid for 21 years after the death of the pet owner. Some pets could live much longer than 21 years, though -- like birds and turtles. Fortunately, Tennessee pet trust law accounts for the possibility of a pet with this kind of longevity.

Tennessee estate planning laws allow for the creation of a trust that serves to care for an animal that was living while the trust planner was alive. Also, unlike other states, Tennessee law allows for the pet trust to continue being valid for as long as the pet is still alive -- or a maximum of 90 years, whichever comes first. It's rare for anything to live longer than 90 years, especially pets, so it's likely that the 90-year limitation will ever need to apply to either you or your pet.

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