When it comes to estate planning, there are several tools available to ensure a smooth transition of assets upon death. While the "Transfer on Death" (TOD) provision is one of these tools, it's important to note that it is not recognized in Tennessee. This guide will provide a comprehensive look at the alternatives to TOD provisions under Tennessee law and how they operate.
Understanding Transfer on Death
A Transfer on Death (TOD) provision allows an asset owner to name a beneficiary who will inherit the asset upon the owner's death, bypassing the probate process. However, this provision is not recognized in Tennessee. Instead, Tennessee residents can use other estate planning tools, such as joint ownership, living trusts, and payable on death (POD) accounts.
Joint Ownership in Tennessee
Joint ownership implies that two or more individuals hold an equal interest in a specific asset. In Tennessee, assets owned jointly usually pass directly to the surviving joint tenant upon the death of the other, bypassing probate. This can be a useful tool for Tennessee residents to ensure a seamless transition of assets upon death.
Living Trusts in Tennessee
Another common method of transferring assets in Tennessee is through a living trust. A living trust allows the trustor to transfer ownership of their assets to the trust while retaining control over those assets during their lifetime. Upon the trustor's death, the assets are transferred to the beneficiaries named in the trust, avoiding the probate process.
Payable on Death (POD) Accounts in Tennessee
Tennessee recognizes Payable on Death (POD) accounts as a valid method of transferring assets. Similar to TOD, a POD account allows the account owner to name a beneficiary who will receive the assets in the account upon the owner's death, bypassing probate. The beneficiary has no legal rights to the assets during the owner's lifetime.
Creditor Protections from POD Accounts
In Tennessee, POD accounts can offer a degree of protection from creditors. When an owner passes away with outstanding debts, creditors typically have a set period to stake their claim against the estate. However, assets transferred via POD accounts bypass probate and are generally inaccessible to creditors unless they can establish a fraudulent transfer case.
Conflicts Between Your Will and POD Accounts
Confusion may arise if a will and a POD account contradict each other. In Tennessee, the beneficiary designation on a POD account usually supersedes a will. This means that if your will stipulates that an asset should be transferred to a particular individual, but the POD account names a different person, the asset will transfer to the person named on the POD account.
Tax and Debt Implications of POD Accounts
In Tennessee, assets transferred via POD accounts face the same estate tax rules as assets transferred through other means. Tennessee does not impose a state estate tax, meaning only federal estate taxes apply. As for debts, assets transferred via POD accounts in Tennessee are typically protected from the deceased's debts, barring a successful fraudulent transfer case.
The Validity of Lady Bird Deeds in Tennessee
A Lady Bird deed, also referred to as an enhanced life estate deed, is a legal document that allows an individual to pass property to beneficiaries while retaining a life estate in the property. The individual also retains the right to sell, lease, or mortgage the property without the beneficiaries' consent. However, Lady Bird deeds are not recognized in Tennessee. Nonetheless, similar outcomes can often be achieved through the use of a revocable living trust.
Establishing a POD Account in Tennessee
Establishing a POD account in Tennessee often involves filling out a form provided by the financial institution that holds your assets. Adherence to all pertinent rules and requirements is vital to avoid potential complications or disputes.
Revoking a POD Account
POD accounts can be revoked or changed at any time during the owner's life, as long as the owner is mentally competent. In Tennessee, this typically involves completing a form provided by the financial institution.
In conclusion, while TOD provisions are not recognized in Tennessee, there are many other effective estate planning tools available. A deep understanding of these tools is crucial when planning your estate. Consulting with an experienced estate planning attorney is advisable to ensure your assets will be distributed according to your wishes.
