Warning: These Are the Claims That Can Reduce The Estate and Your Children’s Inheritance by 10%, 20%, or Even 100% in Some Cases | Tennessee Probate Lawyer

A common question that I receive from many clients is what debts have to be paid and what debts do not have to be paid in a Tennessee probate. This can be a confusing question and there is a lot incorrect information and assumptions that many people believe to be true when it comes to debts of an estate in a Tennessee probate matter.

First, let me correct some misconceptions about debt and probate. In a majority of cases, your estate will remain responsible for the debt that you accumulated during your lifetime. Under Tennessee law, the first expense that will be paid will be what are called administrative expenses. This will likely include the court costs, attorney fees, and reasonable compensation for the personal administrator or executor of the probate estate.

The second debts and claims that are required to be paid are the reasonable funeral expenses for the individual. The third type of debt that is required to be paid are taxes. This would include any taxes that are owed by the individual. This may include estate taxes, estate income taxes, final income tax return, property taxes, or any other miscellaneous taxes. However, there is another claim that falls under the umbrella term of taxes. This is called a TennCare lien.

In Tennessee, there is an organization called TennCare. This is the state agency that is in charge of the state and federal Medicaid program. We have all heard of Medicare, the government run insurance program for those 65 and older. What I am referring to is not Medicare. TennCare, also referred to as Medicaid, is a state entitlement program for elderly individuals, and special needs individuals in some cases, who are in need of financial assistance for long term medical care. The most common scenario involving TennCare is when an individual is in a nursing home facility.

Majority of Tennessee residents who reside in a nursing home facility have at least a portion of their stay covered by Medicaid. Unfortunately, part of the Medicaid program includes an estate recovery right. What this means is that after the individual dies, Medicaid has the right to be reimbursed for all the costs that were paid out in the form of Medicaid benefits while that individual was in the nursing home.

TennCare (or Medicaid) will exercise their Medicaid lien and require reimbursement from the estate for the expenses that were paid out. Unfortunately, in many instances there is simply not enough available assets to pay for the Medicaid lien. When there is not sufficient assets to pay for the TennCare estate recovery claim, TennCare will place a lien on the home, force the sale of that home, so that TennCare can be repaid for the costs that were paid out when the individual was in the nursing home. Even worse, in many of these circumstances, the surviving family does not end up receiving their inheritance due to many and sometimes all of the assets being used to pay the TennCare (or Medicaid) estate recovery claim.

However, there are legal strategies that you can put in place in order to prevent this scenario from playing out in your family. It is commonly referred to as Medicaid planning, but under the rules you must start your planning at least five years in advance of going into a nursing home.

If you have questions or concerns regarding the proper comprehensive estate plan to put in place for your family to ensure a smooth transition of your wealth to the next generation, then please contact our office for a complimentary visit and conversation so that we can discuss your estate planning needs in further detail.

We look forward to hearing from you!

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