Dealing with the loss of a loved one is already difficult. And when probate becomes part of the picture, it can bring more stress to you and your family. In Tennessee, unsecured assets enter probate court, which is a public process that could take months, and make your family vulnerable to disputes from other parties. A financial advisor could work with you to create an estate plan that helps you avoid probate. Here’s what you need to know.
What Is Probate?
Probate is a legal process that occurs after someone dies and it involves the validation of their will (if they have one) and the distribution of their assets to heirs or beneficiaries.
The purpose of probate is to ensure two actions:
- Pay off existing debts from the deceased person’s estate
- Distribute the remaining assets according to the deceased person’s wishes or, if there’s no will, according to the laws of intestacy
The probate court oversees this process and verifies its completion. Here are six general steps involved in probate:
The process typically begins with the filing of a petition in the probate court in the jurisdiction where the deceased person lived at the time of their death. The petition is usually filed by the person named as the executor in the will or by a family member if there is no will. The petition states the deceased’s heirs, beneficiaries and assets. After the probate judge reviews the petition, they’ll appoint an executor if necessary.
Notification to Heirs and Creditors
After filing the petition, the court will schedule a hearing, and the executor must give notice of the hearing to all heirs, beneficiaries and creditors. The hearing provides an opportunity for anyone with an interest in the estate to dispute the will.
The executor is responsible for creating an inventory of the deceased person’s assets and obtaining appraisals when necessary (such as for real estate). This step is essential for determining the total value of the estate.
Payment of Debts and Taxes
Before beneficiaries receive their portion of the estate, the executor must use the estate assets to pay off any outstanding debts, including funeral expenses, taxes and other claims against the estate. Doing so may involve selling assets to generate cash if needed.
Distributing Remaining Assets
After dealing with any debt and tax obligations, the executor disburses the remaining assets to the beneficiaries as laid out by the will. If there is no will, Tennessee’s intestacy laws take over, meaning the deceased’s spouse and children have priority over other family members. If the deceased doesn’t have a surviving spouse or children, the estate goes to the deceased’s parents. In the event this isn’t possible, the deceased’s siblings receive the distribution.
Final Accounting and Closing
Lastly, the executor provides a final accounting of all transactions related to the estate, terms of the will and asset distribution. Once the court approves the final accounting, the estate can be officially closed.
Why Should You Avoid Probate in Tennessee?
Avoiding probate is a goal for many individuals and families due to several potential advantages. Here are four common reasons why people seek to minimize or bypass the probate process in Tennessee:
Probate can be costly, involving court fees, attorney fees and executor fees. By avoiding probate, families can reduce the overall expenses associated with settling an estate. Doing so allows more of the deceased person’s assets to pass directly to beneficiaries.
Expedited Asset Distribution
Probate in Tennessee can be a time-consuming process, and it may take several months to complete. By avoiding probate, assets can be distributed more quickly to beneficiaries, giving them timely access to their inheritance.
Deflect Disputes and Uphold Privacy
Probate proceedings are a matter of public record, and interested parties can review the details of the estate, including the terms of the will. This transparency can sometimes lead to disputes from family members and other parties arguing an interest in the estate. Avoiding probate through living trusts or beneficiary designations could help individuals and families keep their financial affairs private.
Preserve Assets for Beneficiaries
Probate proceedings are guided by the deceased person’s will, but the will is ultimately a matter of the interpretations of an executor and the court judge. Additionally, if there is no will (intestacy), state laws dictate asset distribution. Alternatively, a trust could help you avoid probate by appointing a trustee to manage assets.
How to Avoid Probate in Tennessee
These five common ways to help preserve assets for beneficiaries and avoid probate in Tennessee:
Revocable Living Trusts
A living trust is a legal instrument that contains your wealth and assets. The advantage is that you can create, control and change the trust while you’re alive. You can also appoint a trustee to distribute assets from the trust after your death. Trusts can also help keep asset distribution private.
Passing away doesn’t mark the beginning of when you can transfer wealth to your heirs. Federal law allows you to gift money annually without tax ramifications. Specifically, you can gift $18,000 per person in 2024. And, because the $18,000 threshold applies to individual tax filers, the limit is doubled for joint filers up to $36,000.
Joint Property Ownership
Joint ownership in Tennessee means another person co-owns property with you from the moment you appoint them as an owner. This tool will allow you to share ownership of vehicles, bank accounts and other property. When one of the owners dies, the shared asset will pass automatically to the surviving owner.
Payable-on-Death (POD) Accounts
Payable-on-Death (POD) accounts bypass probate and go to the named beneficiary. POD designations usually apply to bank accounts and certificates of deposit. So, while this tactic isn’t all-encompassing, it can play a part in your overall estate planning strategy to pass on assets without probate.
Accounts With Beneficiaries
Many accounts include beneficiaries within their structures. These allow you to transfer wealth to your heirs without probate. Specifically, you can name beneficiaries on life insurance accounts, annuities, 401(k)s and IRAs. This way, you’ll pass ownership of the accounts when you pass away.
Probate is a legal process following a person’s death, which involves validating a will and distributing assets to beneficiaries. Because it can be time-consuming and costly, avoiding probate through different strategies could help protect assets for your beneficiaries. Consulting an estate planning professional can therefore help you implement specific strategies for your estate planning needs.
Tips for Avoiding Probate in Tennessee
- A financial advisor can help you create an estate plan to preserve and distribute assets for your beneficiaries. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Dying intestate means leaving your estate vulnerable to the probate process. Tennessee’s inheritance laws can affect who receives your wealth after you’re gone, so it’s crucial to understand them and design your estate plan with purpose.
Photo credit: ©iStock.com/Anchiy, ©iStock.com/Drazen_, ©iStock.com/FG Trade