If You Want an Estate Tax Closing Letter, You Now Have to Ask for It

For estates that are required to file a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return*, it is advisable not to close the estate until you know that the IRS has completed its examination of the return and has accepted it (either with or without adjustment). Until relatively recently, the IRS would notify you that the return had been accepted by sending an estate tax closing letter. However, that is no longer the case. For estate tax returns filed after June 1, 2015, the IRS will only issue estate tax closing letters upon request. Specifically, the executor must call the IRS at (866) 699-4083 and provide the following information: Name of the decedent; Decedent’s social security number; Date of death. […]

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Governor Signs SB0769

Today Governor Haslam signed SB0769, a bill that revises various provisions of the Tennessee Code relating to wills, trusts, and probate. The substantive provisions of the bill take effect July 1. Analysis of the bill may be found at the following links: 2017 Probate Omnibus Bill 2017 Probate Omnibus Bill: What’s Missing? Trust Funding & the Probate Omnibus Bill Memorandums of Personal Effects after SB0769 Tennessee’s Revised Slayer Statute Source: Tennessee Legislature Website Posted by Joel D. Roettger, JD, LLM, EPLS

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Tennessee’s Revised Slayer Statute

The new version of Tennessee’s Slayer Statute is much like the old version, only with 10 times more verbiage. Tennessee’s Slayer Statute is based on a simple principle: a killer cannot profit from the killer’s wrong. Thus, a killer forfeits the right to receive property from his victim by way of inheritance or otherwise.  The current version of the Slayer Statute expresses this idea relatively succinctly. In one paragraph and 122 words, it states: Any person who kills, or conspires with another to kill, or procures to be killed, any other person from whom the first named person would inherit the property, either real or personal, or any part of the property, belonging to the deceased person at the time of the […]

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Memorandums of Personal Effects after SB0769

A new statute taking effect on July 1 will finally cause memorandums of personal effects to be legally recognized, but the statute is not without drawbacks. A memorandum of personal effects is separate from, but related to, a client’s last will and testament. It allows the client to dispose of tangible personal property at death, but in a less formal manner. The client simply makes a list of items and the persons who should receive them. Because the list is not a part of the will, it does not need to be executed with the formalities of a will. Therefore the client can update the list as often as he wants without having to consult his attorney or execute a […]

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2017 Probate Omnibus Bill: What’s Missing?

The 2017 probate omnibus bill is notable not just for what it contains, but also for what it does not contain. The original version of the bill was HB 0567. It contained several sections that addressed the effect of divorce or annulment on an estate plan. Under current law, divorce/annulment, by itself and without any further action of the testator revokes any disposition or appointment of property made by the will to the former spouse, any provision conferring a general or special power of appointment on the former spouse, and any nomination of the former spouse as executor, trustee, conservator or guardian, unless the will expressly provides otherwise. Similarly, a decree of annulment, divorce, dissolution of marriage, or legal separation revokes […]

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2017 Probate Omnibus Bill

Every few years, the Tennessee legislature introduces an “omnibus” probate bill. These bills address a broad range of issues in the areas of wills, estates, and trusts. The most recent omnibus bill just cleared the Senate and House. A summary of the key provisions is as follows: Sections 3, 4, 5, 6, and 10 are simply housekeeping changes that amend the following statutes to reflect the repeal of the Tennessee inheritance tax on January 1, 2016: T.C.A. § 30-2-614(e) [pertaining to apportionment of death taxes] T.C.A. § 30-2-713(c) [agreements between personal representatives and beneficiaries or governmental authorities] T.C.A. § 30-4-103(5)(A) [small estates] T.C.A. § 30-4-104(d) [small estates] T.C.A. § 32-3-108(b) [interpretation of marital deduction language in a will] Sections 1, […]

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Don’t Neglect the Residuary Clause

A recent case demonstrates the need to carefully consider how one drafts the residuary provisions of a will or trust. Article III of Decedent’s will left the “rest, residue, and remainder” of her estate to Sister, Nephew 1, Nephew 2, and Niece. Sister was to receive 2/5, and the Nephews and Niece were each to receive 1/5. In that same article, the Decedent gave Nephews the right to purchase her residence on the condition that they “shall pay such amount to [Niece] as makes her share of [Decedent’s] estate equal with them.” If Nephews did not exercise their right to purchase, the property was to be sold and the proceeds divided “with the rest of [Decedent’s] estate in the manner set forth […]

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Forget Intent, It’s the Beneficiary Designation that Controls

Another case reiterates the primacy of beneficiary designations over other evidence of a decedent’s intent. The situation is tragic, but the result is wholly predictable. Wife and Husband were the parents of a 12 year old Son when they were both diagnosed with terminal cancer. Although Wife was diagnosed first, Husband was not expected to outlive her. Wife, however, died first. Son was 16 at the time. Wife was the owner and insured under a $600,000 life insurance policy. She initially named Husband as beneficiary. When Husband went to collect the insurance proceeds, he discovered that Wife had changed the beneficiary designation shortly before her death. The actual beneficiaries were Husband (50%) and Wife’s Sister (50%). Why Wife left half the proceeds […]

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Is a Resident Executor/Trustee Required Under Tennessee Law?

At first glance, the answer might appear to be yes: Any person who is not a resident of this state or any corporation that is authorized to exercise fiduciary powers, but is not authorized to do business in this state and does not actually maintain an office in this state, shall not be appointed or allowed to serve as trustee of a corporate or personal trust, personal representative of an estate, guardian, conservator for an incompetent person, guardian for a minor or in any other fiduciary capacity, unless there is also appointed as a fiduciary to serve with such nonresident fiduciary, a person resident in this state or corporation authorized to do business in this state and that maintains an […]

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Executors and the Decedent’s Unpaid Taxes: A Trap for the Unwary

An executor is normally not personally liable for the debts of a decedent. However, a special rule applies to federal taxes. Outside the Tax Code, in an obscure corner of federal law, we find the following: A representative of a person or an estate (except a trustee acting under title 11) paying any part of a debt of the person or estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government. For this purpose, the term “unpaid claims” is intentionally broad, covering income tax (individual or estate), estate tax, gift tax, and the civil penalty associated with unpaid payroll taxes. Essentially, the government is saying “we get paid […]

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Five Ways Assets Pass at Death

Operation of law (e.g., joint tenancy with right of survivorship) Beneficiary Designation (life insurance, retirement assets, annuities) Will Trust (revocable or irrevocable) Intestacy (no will) In a properly designed estate plan, Items 1, 2, 3 and 4 will be coordinated so that all of your assets pass to your intended beneficiaries in the most tax-efficient manner. Income taxes are a particular issue with respect to Item 2. Item 5 is the product of (a) failing to plan altogether, (b) improper design (e.g., the will does not dispose of all your assets), (c) faulty execution of the will (e.g., no witnesses or signatures in the wrong place), or (d) lost documents.  Intestacy often leads to assets passing in undesirable ways, such as to […]

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Fiduciaries May Not Impair the Marital Deduction

Tennessee has a statute on it: No executor, trustee or other fiduciary may take, or refuse to take, any action, or make or retain any investment, the result of which would defeat an otherwise available marital deduction under the Internal Revenue Code (26 U.S.C.), or under the laws of this state, if the obvious and expressed intent of the testator or settlor was to take advantage of this deduction. After May 23, 1977, this section applies to all acts or investments, by all executors, trustees or other fiduciaries, as to all wills and trusts, whenever these instruments were executed or created. This statute could prove useful in cases when a non-spouse executor or trustee–typically a child of the decedent and step-child […]

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New Case Underscores Need to Update Beneficiary Designations After Divorce

Husband and Wife were in the midst of divorce proceedings when Wife died. Prior to her death, the parties executed a separation agreement dividing their marital assets. Under the agreement, Wife was to retain the couple’s residence in Tennessee, as well as an IRA. Husband was to receive the couple’s residence in Georgia and a financial account. The parties had neither finalized the divorce nor fulfilled the terms of the separation agreement at the time of Wife’s death. Thus a legal battle ensued between Wife’s estate and husband regarding the proper disposition of the Wife’s assets, particularly those that were titled jointly with her husband, as joint assets normally pass to the surviving spouse by operation of law. The separation […]

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