No Will, Big Problem?Author: jlbworks Jun 05, 2014
I recently met with prospective clients who have two children over the age of 18, and no Last Will & Testament. We discussed estate planning options and at the end of the conversation the husband asked a simple question. Why do I need a Last Will & Testament if everything I own will just pass to my wife when I die? This simple question, based on a false presumption, has a surprising answer. If a husband or wife owns an asset in their personal name, and there are no beneficiary designations on the asset, and the husband has children, then 100% of the asset will not pass to the surviving spouse.
If you die without a Last Will & Testament, your probate estate will be distributed pursuant to Tennessee’s intestate laws. Under Tennessee’s intestate laws, if a deceased spouse has children, then a surviving spouse will inherit either one-third (1/3) of the deceased spouse’s probate estate or a child’s share of the entire probate estate, whichever is greater. The remainder of the probate estate goes to the deceased spouse’s children. For example, if a husband and wife have three children, and the husband dies without a Last Will & Testament, then any assets that he individually owns would pass 1/3 to the surviving wife and the remaining 2/3 would be split between the three children. If the husband only had one child, then the estate would be split 1/2 to the surviving spouse and 1/2 to the child. In most instances, this is not the preferred distribution pattern of a husband and wife. You can see how this scenario becomes even more complicated if the children are minors because the children’s interest is going to be held in a guardianship until they reach of the age of 18. Even more complicated, I have seen situations where the children were from a previous marriage and were hostile to the surviving spouse, creating an untenable situation that had to be resolved.
The complicated nature of intestate succession can be seen in the probate of Steve McNair’s Estate. Steve McNair, former Tennessee Titan Quarterback, died in 2009, without any estate planning and an estate valued at approximately $20,000,000.00. Steve McNair was married at the time of his death, and had four children, two of whom were from previous relationships apart from his wife. Needless to say, his estate did not just pass to his wife upon his death. However, with some simple planning, Steve McNair could have put in place an estate plan that expressly implemented his desires for his estate upon his death.
It is important to note that the intestate distribution pattern only affects probate assets. Assets with beneficiary designations are not generally probate assets. Assets with beneficiary designations are typically checking and saving accounts, individual retirement accounts or 401ks, as well as life insurance policies. Real estate, depending on how it is titled, can also pass outside of probate and avoid the intestate distribution laws. So it is possible to structure the title to assets to avoid probate and thus, intestate laws. But that approach has to be handled with extreme attention to detail and even then, one unknown or unexpected event, such as receiving an inheritance, could upset the planning.
A simple solution to avoid Tennessee’s intestate laws is to create and execute a Last Will & Testament. This option allows you to choose who is inheriting your estate, and on what terms, which can be very important in many circumstance, particularly when leaving assets to children.
If you would like more information on creating an estate plan, or to review your current plan, please call or email us at Fidelis Law.