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Estate Planning

Planning for Life.

Tennessee Probate – What Happens to Jointly Held Property if One Spouse Dies Before the Divorce is Final?

The Tennessee Court of Appeals recently decided a case that is instructive on the probate or administration of an estate in Tennessee when the deceased is involved in a divorce case that is not finalized before the date of death.

Here’s the problem that may come up when one of the parties to a divorce dies before the divorce is final: what happens to the real property that the couple owns jointly? Does the surviving spouse get the property even where the parties had already agreed in a settlement agreement for the property not to go to the surviving spouse but no deed has been signed before death?

In re Estate of Cleveland, the Tennessee Court of Appeals was confronted with a situation very similar to this. Mr. and Mrs. Cleveland were involved in divorce proceedings in Georgia. They had entered into a settlement agreement that provided that Mr. Cleveland would get some jointly owned real property in Georgia, and Mrs. Cleveland would get some jointly owned real property in Tennessee.

Before the parties had signed the quitclaim deeds that finalized the property transfers and before the parties’ divorce was final, Mrs. Cleveland died.

There were a number of issues raised in the lawsuit, including whether Mr. Cleveland had rescinded the settlement agreement before Mrs. Cleveland died.

What is important and instructive is this: the Tennessee Court of Appeals determined that if the settlement agreement had not been rescinded before Mrs. Cleveland died (and it found that, indeed, there had been no valid recession), the Probate Court was obligated to enforce the settlement agreement between the parties, even though there had been no deeds signed and the parties were still legally married at the time of Mrs. Cleveland’s death.

Of course, if a person dies in Tennessee before a pending divorce case is final, one must look to and take into account an executed settlement agreement entered into between the parties in connection with the divorce. If the settlement agreement provides for a disposition of jointly held property that is different from how the property would otherwise go on the death of one of the parties, the settlement agreement is likely to prevail.

Probate of an estate of a party involved in a divorce proceeding can raise difficult and challenging questions. It is important that all parties involved–the named executor under the last will and the beneficiaries–look into the underlying facts and consult legal counsel experienced in Tennessee probate matters.

 

Probate & Estate and Trust Planning Alert – Problems with an Irrevocable Trust? Consider Decanting

If you are following Tennessee probate and estate planning matters and news, you may have seen some recent articles talking about decanting irrevocable trusts.

In effect, decanting permits a trustee in certain situations to distribute assets from an irrevocable trust to a newly set-up trust. This is a planning strategy that may allow a change in how trust assets are administered under an irrevocable trust agreement that has terms that are no longer considered to be appropriate under the circumstances.

Although not directly changing an irrevocable trust, the impact is much the same.

Click here to read one of those recent articles on decanting irrevocable trusts: Click to read Decanting Article.

Of particular interest to Tennessee residents is that Tennessee is a decanting-friendly jurisdiction.

 

 

The Coming Tax Reform – Is the Federal Estate Tax on the Chopping Block?

There has been talk recently that Congress is preparing to pivot from healthcare reform (which failed to materialize, at least to this point) to federal tax reform.

One of the key planks of the Republican platform for tax reform is the elimination of the federal estate tax.

Whether this will actually happen is anyone’s guess. So, I will guess.

I am predicting . . . (drum roll) . . .that the federal estate tax will indeed be eliminated from the Internal Revenue Code through upcoming federal tax reform.

Check back as tax reform heats up in Congress, and I will try to keep you informed of developments as they arise.

The Titans may not have made the playoffs, but Tennessee is Number 1 in something

It’s NFL playoff time.

Congratulations to all the teams and the fans of the teams that made to this year’s playoffs.

Unfortunately, if you live in the Nashville area or elsewhere in the great state of Tennessee and are a Titans fan, the end of the season has been somewhat of a letdown.

Sure there were great moments, including a stomping of the Green Bay Packers and a late season win over the powerful Kansas City Chiefs on their field (which resembled a Siberian tundra that day).

But the disappointment of losing to the lowly Jaguars and missing the playoffs has left many Tennesseans with a gloomy attitude as 2016 heads for the exits.

Still, there is at least a bright spot on the Tennessee legal front as 2017 makes its way into our lives.

At the end of the year, one can often find articles about changes that have come in the old year or changes on the horizon in the coming year. One such article appeared in the Forbes online website – read it here.

And guess what? Tennessee is Number 1 on the list of the 5 best state and local tax policy changes of 2016.

What is that winning change in the legal landscape of tax policy that has rocketed Tennessee to the top of the charts as the calendar turns from 2016 to 2017?

Tennessee has passed legislation that eliminates the so-called Hall Income Tax (over time, it’s true, but still–we got to take our tax victories where we can find them). By doing away with the 6% Hall Income Tax on dividends and interest, Tennessee becomes the first state in a generation (36 years to be exact) to eliminate its state income tax.

Now, the elimination of the Hall Income Tax is phased in over a number of years, with a 1% reduction each year that certain revenue targets are met, but no matter what happens (i.e., the come hell or high water rule), the Hall Income Tax will be gone in 2022.

So, all you Titans fans who are crying in your beer over missing the playoffs–if you have dividend or interest income, take heart! The mean old Hall Income Tax is on its way out the door over the next 6 years. Let’s hope that we won’t have to wait that long to see the Titans in the NFL playoffs. And with the current team, I can hardly wait until next year!

Happy New Year!

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