A Tennessee living trust is an estate planning tool that lets you maintain the use of your assets while placing ownership of them in a trust. After your death, they are passed to beneficiaries of your choice.
Living Trusts in Tennessee
A living trust in Tennessee is created by the grantor, the person transferring assets into the trust. The more assets you transfer to the trust, the more advantageous the trust will become. Note that some assets, such as life insurance and retirement accounts, are not eligible for transfer to a trust. The trust assets are managed for your benefit during your lifetime. You must choose a trustee to handle this responsibility, and most people name themselves, with a successor trustee in place to step in after your death. At that point, the trustee’s responsibility is to protect and manage the trust assets and then distribute them to your beneficiaries according to the terms you create. Your revocable living trust (also known as an inter vivos trust) can be changed or eliminated at any time you choose. An irrevocable living trust cannot be altered once it is created.
A living trust Tennessee keeps your trust assets out of probate. Probate is the court process required for approving and enacting a will. Probate can take months (particularly since Tennessee does not use the Uniform Probate Code so its procedures are lengthy). Probate also involves costs: an executor and attorney will charge fees and there are court fees to be paid. A trust bypasses all of this and has the benefit of being able to distribute your assets immediately upon your death. A will cannot make distributions until probate is concluded. A trust also allows you to avoid probate in any state in which you own property if you include those assets in your trust.
Tennessee offers a streamlined small estate process for estates that are worth less than $50,000 and do not contain real estate. Faster and less inexpensive than regular probate, this procedure is also less expensive than setting up a trust.
Do I Need a Living Trust in Tennessee?
Living trusts are not only easy to use, but they provide other benefits. A living trust allows you to keep your family’s business private. A trust is not public record. A will is always made public record when it is probated. No one need know what assets are in your trust, who your beneficiaries are, or when the assets are distributed. Living trusts are also harder to contest than wills, making your directives secure.
Living trusts give you complete control over your assets during your life and after you die. While you are alive, the assets are owned by the trust, but you use them and do anything you want with them since you have control. You live in your home and drive your car as you normally would. After your death, the assets are protected and managed by the trustee and then are distributed to you beneficiaries at the times you select. Many people choose to distribute when beneficiaries reaching specific future ages. A will does not give you this flexibility and distributes assets as soon as probate is concluded.
Your revocable living trust protects you should you become mentally incapacitated. All of your assets are already controlled, owned, and managed by the trust and a conservatorship proceeding is likely unnecessary. While a durable power of attorney can be rejected, a trust cannot be. Your financial life is protected by the trust.
Living Trusts and Estate Taxes in Tennessee
Creating a living trust in Tennessee does not protect assets from estate tax. Tennessee applies an estate tax to estates worth over $5 million (in 2016, the estate tax will be completely eliminated, however). The federal estate tax applies to estates over $5 million. A specially written trust called a QTIP trust (also known as an AB trust or marital trust) does avoid estate tax when assets are left from a deceased spouse to a surviving spouse. Medicaid spend down laws apply to assets in a living trust. Creditors are also able to access your trust assets.
How to Create a Living Trust in Tennessee
To create a living trust in Tennessee, prepare a written trust agreement and sign it in the presence of a notary. The trust is not effective until you transfer ownership of your assets into it. Living trusts can provide flexibility and benefits that are not available with other estate planning options.
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