Almost everyone has heard the concern that I want to plan my affairs so that the government doesn’t tax me when die. Quite a few clients are concerned with taxes and concerned about leaving an inheritance for their family when they are gone, and providing their family with as little interruption as possible. However, taxes are not something that most Tennessee families should be worrying about.
Specifically, the Federal Estate Tax simply only applies to approximately 1% of Americans. The Federal Estate Tax only applies to estates that have a gross value of $5.25 million in assets or higher on the date of death. In addition, this increases each year as it is indexed for inflation. In addition, portability allows the surviving spouse to use the decedent spouse’s unused federal estate tax exemption, thereby allowing for a possible $10.5 million exemption from the federal estate tax. Therefore, most Tennessee families simply do not need to worry about the federal estate tax applying to their estate and harming their family.
In addition, most families do not need to worry about Tennessee’s estate tax, referred to as the Tennessee Inheritance Tax. In 2015, the Tennessee Inheritance Tax only applies to estates with a gross value in excess of $5 million in assets on the date of death. Also, Tennessee is following most states by abolishing their estate tax. As such, the Tennessee Inheritance Tax will be completely be abolished beginning in 2016.
The aspect of estate planning that most Tennessee families need to be aware of is avoiding probate when they die. In Tennessee, the probate process, which is the transferring of your assets at death to your surviving family members, can last anywhere from six months up to two years or longer in duration. In addition, there are no set and predetermined attorney fees for a probate matter in Tennessee. Therefore, an attorney can charge whatever they deem to be a reasonable fee given the unique circumstances of the particular probate matter. In actuality, we have seen probate costs total $10,000, $20,000, or more when you combine the attorney fees, court costs, executor compensation, and all the other costs involved in the matter.
More important, probate is a public court process. Therefore, all of the assets that you own, all of the debts that you owe, and how much each member of your family will inherit, will be public record for anyone to see. Finally, your assets will be frozen and your family will have to wait for an undetermined length of time before gaining access to your assets, that may very well need to be used to cover your final expenses.