Estate Planning Maybe it is only death that is certain. Lara Daniel

“Our new constitution is now established, and has an appearance of permanency, but in this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin, 1789

Estate/Inheritance Tax Federal $5,430,000 Portability of unused exemption Tennessee $5,000, – No tax

Estate Planning Still a need for a comprehensive estate plan.

No Plan? Don’t worry, the State has one for you. When a person dies intestate: – Spouse – not less than 1/3 – Issue – by representation – If no spouse or issue, parents – If no parents, siblings and their issue – If no siblings, then grandparents and their issue

Insufficient Plan? Obviously, the cost of drafting a will through the use of a pre-printed form is likely to be substantially lower than the cost of hiring a knowledgable lawyer. However, as illustrated by this case, the ultimate cost of utilizing such a form to draft one’s will has the potential to far surpass the cost of hiring a lawyer at the outset.

2 new mechanisms for estate planning – Asset Protection 2 more that are not effective, YET – Deed on Death – Digital Assets

Asset Protection Trusts During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor’s creditors. A creditor of the settlor of an irrevocable trust may reach the maximum amount that can be distributed to or for the settlor’s benefit.

Asset Protection Trusts Two new types of trusts: Investment Services Trust Tenancy by the Entirety Trust

Asset Protection Trusts Tennessee Investment Services Act of 2007 creates an exception to the rule. Requirements: – Irrevocable – Must expressly incorporate Tn. Law – Transferor cannot be the Trustee – Spendthrift language – Transferor’s Affidavit

Asset Protection Trusts Exceptions to the exception Fraudulent Conveyances Certain “Involuntary” creditors – Child support obligations – Those stemming from alimony or spousal support HOWEVER, dispositions made BEFORE marriage ARE protected from spousal claims

Asset Protection Trusts When might this be used? As a substitute for a prenuptial agreement To guard against “unanticipated but nonetheless conceivable” claims

Asset Protection Trusts Tenancy by the Entirety Joint Revocable Trust Effective July 1, 2014 a/k/a Marital Asset Protection Trust

Asset Protection Trusts Tenancy by the Entirety – Property is owned by the marital unit – Held with Right of Survivorship – Individual creditors cannot attach – Joint creditors can – Individual creditors of the first spouse to die cannot attach

Asset Protection Trusts Prior to TCA , the asset protection features of T by E were lost if the property was placed in a trust. But now, property shall have the same immunity from the claims of separate creditors as would exist if they had continued to hold the property as T by E.

Asset Protection Trusts Requirements for a TBET – Property must have been held as T by E prior to the conveyance to the trust – Marriage must continue – Revocable by either spouse as long as both are living – Both spouses must be beneficiaries – Trust instrument must specify that the provisions of the statute apply

Asset Protection Trusts Why use a TBET? – More protection, flexibility after the death of the first spouse. – TBET could provide that upon death of the first spouse the assets go into an irrevocable spendthrift trust for the benefit of the survivor.

2 Estate Planning Measures that were introduced, but not passed, in Tennessee during the last legislative session: – Uniform Real Property Transfer on Death Act – Uniform Fiduciary Access to Digital Assets Act

Deed on Death Uniform Real Property Transfer on Death Act At least 20 states have this or similar legislation A Will Substitute – Non-probate Transfer

Deed on Death Requirements: – Elements and formalities of a deed – States that the transfer is to occur upon death of transferor – Must be recorded before transferor’s death

Deed on Death Deed Does NOT – Affect the interest or right of Transferor – Create an interest in the Transferee – Affect creditors of either Transferee must survive Revocable – Instrument of revocation must be recorded

Deed on Death Transferee takes subject to all encumbrances in effect at time of transferor’s death If probate estate is insufficient, then the estate may enforce the liability against property. Tn. Fiscal Note

Deed on Death Issues – Will this become a “tool of fraud?” – Stacking of Deeds on Death and Revocations Effect on title insurance Effect on lending – Result in Piecemeal Estate Planning – Should special provisions be included in POA?

Digital Assets A generation ago, a human being delivered our mail, photos were kept in albums, documents in file cabinets, and money on deposit at the corner bank. For most people today, at least some of their property and communications are stored as data on a computer server and accessed via the Internet

Digital Assets What are they? – Practical: online access to bank account – Sentimental: uploaded pictures, blogs – Valuable: websites, some blogs, paypal Custodians control access using click through terms of service agreements that most account holders do not read.

Digital Assets Fiduciaries Service agreements frustrate the duty to gather and manage property Laws prohibit unauthorized access to computers and data

Digital Assets Uniform Fiduciary Access to Digital Assets Act At least 7 states have legislation, varying in scope UFADAA has been introduced in at least 23 states, including Tn Vests fiduciaries with the authority to access, control or copy digital assets and accounts. Requires custodians to follow account holder’s direction for granting access to fiduciaries.

Digital Assets There should be specific provisions in any estate planning documents – wills, POAs – about digital assets. – May grant authority to fiduciary. – Or, might specifically prohibit authorization to the fiduciary. – May absolve fiduciary of liability.

Digital Assets Does not break new legal ground. Restores control to the owner of the assets.

Thank you! QUESTIONS?