Clients are always concerned that they do not want their children’s inheritance reduced by costs, attorney fees, and taxes. In addition, most clients feel the government gets enough from them during their lifetime, and do not want their children to suffer at their death even more so as a result of their estate being reduced by unnecessary costs.
However, one way to ensure that your estate is reduced by unnecessary costs is not to plan for your family’s future when you are gone. In Tennessee, the process in transferring the assets that you owned during your lifetime to the family that you leave behind is called probate. If you have a Last Will and Testament, commonly referred to as a Will, this document will be admitted to probate and your assets will be transferred to your loved ones according to the wishes stated in your Will. However, if you do not have a Will when you die, then your assets will pass to your family according to Tennessee law.
When you die without a Will, the law refers to this as dying intestate. In this circumstance, an administrator would need to be appointed to oversee the settlement of your estate through probate and the transfer of your assets to your surviving family members. The administrator that is appointed is usually a close family relative such as a surviving spouse or an adult child. This process of transferring your assets to your surviving family members through the probate process can range anywhere from six months to two years or more depending upon the amount of assets, issues, and complexities involved in your estate.
However, an important aspect of Tennessee law to be aware of is referred to as elective share. In Tennessee, a surviving spouse can choose to elect to inherit against the Will or can choose the elective share as opposed to what he or she would receive from the intestate estate if the spouse dies without a Will. These shares depend upon on how long you were married. For example, if you were married for less than 3 years it is 10% of the net estate, if you were married for 3 to 6 years it is 20% of the net estate, if you were married for 6 to 9 years it is 30% of the net estate, and if you were married for 9 years or more it is 40% of the net estate.
Now, this can become an issue for your family if you die without a Will and you are married and have children. In this type of circumstance, your spouse and children would inherit all of the property equally, but your spouse’s share will not be less than 1/3 of the gross estate.
For example, let’s say you die unexpectedly and without a Will, and your gross estate, including all of your assets is $1,000,000. Now, you were married at the time of your death and have three children. Under the law, your spouse and three children would inherit everything equally, but your spouse would receive no less than 1/3 share of your estate. Therefore, although your spouse and children would inherit everything equally under the law, your spouse would not receive $250,000 of the gross estate, but instead would receive approximately $333,000 leaving your three children to equally inherit the remaining $667,000 for a share of your gross estate of approximately $222,000.
However, in this example, your spouse could choose to take her elective share. Let’s say that you and your spouse were married for over 15 years. In this case, your spouse could take an elective share of the estate and take 40% of the gross estate, or in this example, $400,000 of the gross estate leaving the remaining $600,000 to be divided among your three children.
Is the Tennessee law made estate plan what you would want for your family in the event of your death? Most clients that we speak to say no! The reason is that most clients do not want their spouse and three adult children fighting over his or her estate after their death. Most clients want everything to go to their spouse after they die, and if their spouse predeceases them, they want all of their assets to go to their children equally. Well, in Tennessee, if you die without a Will in place, your spouse and children will inherit in equal shares and your spouse may choose to take an elective share.For these reasons of uncertainity, it is important to plan your affairs in advance and establish an estate plan that fully addresses all of your goals and objectives.