Estate Planning

Guide: Tennessee

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    🌄 Estate Planning in Tennessee: Key Things Every Client Should Know

    Tennessee is a favorable state for estate planning because it has no state inheritance tax and no estate tax, but there are still important issues that residents should understand. Here is what Tennessee families need to know when planning their estates.

    1. No Tennessee Estate or Inheritance Tax

    Tennessee repealed its estate and inheritance taxes.
    This means most estates owe no state-level tax, regardless of size or value.

    However:

    • Federal estate tax may still apply to very large estates.

    • Strategic planning is still needed to manage probate, control distributions, and protect assets.

    2. Probate in Tennessee

    Probate is the process of settling your estate after death. In Tennessee, probate can be straightforward, but delays happen when:

    • There is no will

    • Beneficiaries disagree

    • Assets are not titled correctly

    • Real estate must be sold

    • The will is outdated or handwritten (holographic wills require proof of handwriting)

    Clients may benefit from avoiding probate for certain assets by using:

    • Transfer-on-death (TOD) and payable-on-death (POD) designations

    • Joint tenancy with rights of survivorship

    • Revocable living trusts

    3. Creating a Valid Tennessee Will

    A Tennessee will must be:

    ✔️ In writing
    ✔️ Signed by the testator
    ✔️ Witnessed by two competent witnesses

    Self-proving wills (signed with a notary and affidavit) make the probate process simpler.

    A will should cover:

    • Who receives your property

    • Guardianship for minor children

    • Appointment of an executor (personal representative)

    • Instructions for special items or family arrangements

    4. Durable Financial Power of Attorney

    A Durable POA allows someone to handle finances and legal matters if you become incapacitated.

    Tennessee clients should know:

    • A POA remains valid even if the person becomes incapacitated (if drafted properly)

    • Without a POA, family members may need a conservatorship—a court process that is expensive, slow, and invasive

    • Banks may require specific wording or updated forms

    Keeping POAs updated is critical.

    5. Durable Healthcare Power of Attorney & Living Will

    Tennessee recognizes both:

    • Durable Healthcare Power of Attorney (names someone to make medical decisions)

    • Living Will (Advance Directive) (states end-of-life wishes)

    These documents help ensure the client’s preferences are honored regarding:

    • Life-support decisions

    • Pain management

    • Organ donation

    • Long-term care preferences

    6. Using Trusts in Tennessee

    Trusts are useful for many Tennessee clients, especially when they want to:

    • Avoid probate

    • Plan for minor children

    • Protect beneficiaries from creditors

    • Control distribution timing

    • Provide for special-needs family members

    • Protect assets in blended family situations

    • Avoid conservatorship in case of incapacity

    Irrevocable trusts may also be used for:

    • Asset protection

    • Long-term care and Medicaid planning

    7. Real Estate in Tennessee

    Key issues about property:

    • Joint tenancy with right of survivorship avoids probate for married couples

    • Property held in sole name will pass through probate

    • Out-of-state real estate may require secondary probate unless placed in a trust

    • Transferring property improperly can create Medicaid penalties

    Discuss with clients whether their home should be held in a trust, transferred, or left through their will.

    8. Long-Term Care & Medicaid Rules

    Tennessee Medicaid (TennCare) has:

    • 5-year lookback period

    • Strict rules on asset transfers and income limits

    • Home equity rules that vary by marital status

    Planning early helps:

    • Protect the family home

    • Avoid spend-down surprises

    • Preserve assets for spouses or children

    Tools may include irrevocable trusts, spend-down strategies, caregiver contracts, or restructuring assets.

    9. Review Beneficiary Designations

    Some assets bypass probate, including:

    • Life insurance

    • Retirement accounts (IRA, 401(k))

    • Bank and brokerage accounts with POD/TOD

    • Annuities

    These must be reviewed after major life events like marriage, divorce, new children, or death of a beneficiary.

    Tennessee does not tax life insurance when paid directly to a named beneficiary.

    10. Planning for Digital Assets

    Tennessee has adopted laws allowing fiduciaries to manage digital assets when authorized, including:

    • Email accounts

    • Cryptocurrency

    • Cloud files

    • Social media

    • Online banking and investments

    • Digital photo libraries

    Clients should specify digital-asset authority in their will, trust, and powers of attorney.

    11. Special Planning Considerations for TN Clients

    Tennessee residents should also think about:

    • Blended families and second marriages

    • Unmarried partners (no automatic inheritance rights)

    • Special-needs beneficiaries (must use proper SNTs)

    • Small business ownership (succession plans, buy-sell agreements)

    • Estate liquidity for debts, probate costs, or insurance needs

    ✔️ Most Tennessee Clients Need a Basic Estate Plan Including:

    • Last Will & Testament

    • Durable Financial Power of Attorney

    • Healthcare Power of Attorney

    • Living Will / Advance Directive

    • Updated beneficiary designations

    • Trusts as needed (probate avoidance, minor children, blended families, Medicaid planning)