Moving to a new state involves a lot of changes, and one often overlooked task is updating your estate plan. If you’re new to Tennessee, understanding the state’s specific laws and how they impact your estate planning is crucial. Whether you’re a retiree settling down in the Smoky Mountains or a young professional relocating to one of our big cities, this guide will help you navigate estate planning in Tennessee.
Why Estate Planning Matters
Estate planning isn’t just for the wealthy or the elderly…estate planning is for everyone! It’s about ensuring that your wishes are honored and that your loved ones are taken care of in the event of your death or incapacity. A well-crafted estate plan can:
- Distribute your assets according to your wishes
- Minimize taxes and legal fees
- Appoint guardians for minor children
- Provide instructions for your care if you become incapacitated
Key Components of an Estate Plan
- Last Will and Testament: This document outlines how you want your assets distributed after your death. In Tennessee, if you die without a Will (intestate), the state will distribute your assets according to a set formula, which may not align with your wishes.
- Revocable Living Trust: A living trust allows you to manage your assets during your lifetime and efficiently transfer them after your death without going through probate, which can be a lengthy and costly process in Tennessee.
- Durable Power of Attorney: This document designates someone to make financial decisions on your behalf if you become incapacitated. Tennessee recognizes “durable” powers of attorney, meaning this document and the powers it conveys will remain in effect even through periods of mental incompetency.
- Healthcare Power of Attorney, Living Will, HIPAA Authorization: These documents allow you to appoint someone to make healthcare decisions for you, outline your wishes regarding medical treatment if you cannot communicate them yourself, and give certain people you’ve named access to your providers and your medical records.
- Beneficiary Designations: Review and update beneficiary designations on life insurance policies, retirement accounts, and other financial assets, as these generally supersede the instructions in your will.
Tennessee-Specific Considerations
- Tennessee Inheritance and Estate Taxes: One of the perks of living in Tennessee is that the state does not impose an inheritance tax or an estate tax. However, federal estate taxes may still apply, depending on the value of your estate.
- Tenancy by the Entirety: Tennessee is one of the few states that recognize tenancy by the entirety, a form of joint ownership available only to married couples. This means that property held in this manner automatically passes to the surviving spouse without going through probate. But it’s easy to “sever” this type of ownership inadvertently, so speaking to an estate planning attorney is a wise move before adding people to your deed or otherwise transferring ownership of real estate or bank accounts.
- Homestead Exemption: Tennessee offers a homestead exemption, which protects a portion of your home’s value from creditors. This can be an essential part of your estate planning strategy, particularly if you have significant debt.
- Small Estate Affidavit: If your estate is valued less than $50,000, Tennessee allows for a simplified probate process through a small estate affidavit, making it easier for your beneficiaries to access your assets without going through a full probate process.
Steps to Take When Moving to Tennessee
- Review and Update Your Will: Even if you have a Will from another state, it’s essential to review it with a Tennessee estate planning attorney to ensure it accomplishes all that it can according to Tennessee law.
- Consider Creating a Revocable Living Trust: If you own real estate or want to avoid probate, a living trust can be a valuable tool.
- Update Your Power of Attorney Documents: Ensure your durable power of attorney and healthcare directives are up to Tennessee’s standards.
- Review Beneficiary Designations: Moving is a good time to revisit who you’ve designated as beneficiaries on your accounts and policies.
- Consult a Tennessee Estate Planning Attorney: Estate planning laws vary significantly from state to state. A local attorney can help you navigate Tennessee’s specific requirements and ensure your plan is legally sound and accomplishes all of your objectives for your assets and your family.
Relocating to Tennessee is an exciting opportunity to start fresh, but don’t forget to bring your estate plan up to date. Whether you’re starting from scratch or updating an existing plan, taking these steps will give you peace of mind and protect your loved ones in the future.
If you haven’t yet created an estate plan, now is the perfect time to get started. And if you already have one, take the time to review it with a Tennessee estate planning attorney to ensure it’s still meeting your needs. Your loved ones will thank you when it comes time for them to take the reins.