Tennessee Probate and Estate Tax Laws

Code Sections

Tennessee Code Title 30: Administration of Estates, 31: Descent and Distribution, 32: Wills, and 35: Fiduciaries and Trust Estates

Types of Estate Administration

In Tennessee, estate administration requires a court appointment representative. The representative needs to complete and file inventories of assets, contact creditors and heirs, distribute assets, and more, all with permission and submission of documents to the court. It's a complicated process that varies based on the types of assets and number of debts or beneficiaries involved.

There’s a separate, simpler process for small estates. If an estate has a value of $50,000 or less and no real property, a small estate affidavit can be filed 45 days after the death. The affidavit or written statement must include:

• Whether the decedent had a will, and provide it, if applicable
• A list of the decedent's unpaid debts
• A list of the decedent's property
• The name and address of everyone who has decedent's property now
• Name, age, address and relationship of everyone entitled to the estate
• Whether notice will be provided to the credits (as is done with regularly administered estates)

Finally, if an estate is insolvent or doesn't have enough money to pay its creditors, there's an additional process. All creditors will receive letters about the lack of funds to pay them and will have 30 days to file an objection to the plan of distribution and closing of estate.

Family Allowances

The surviving spouse of a person who dies without a will is entitled to the home for the rest of his or her life. Then the home goes to any minor children until they turn of age or marry.

In addition, surviving spouses are entitled to a reasonable allowance from the estate for maintenance for one year after the death of the spouse. If there's no surviving spouse, unmarried minor children can receive this allowance.

The spouse is also entitled to personal property in the home, a vehicle, and crops, if any, valued at up to $50,000. A surviving spouse can elect to take the home, year's allowance, and exempt property instead of what they were left in the will, typically done when little or nothing is left to the spouse in the will.

What Assets Require Probate?

Generally, if a decedent owns any assets in his or her name alone at death, the assets will need to go through probate to legally pass to a new owner. Some examples of assets that require probate:

• Bank and credit union accounts in the decedent's name alone, without a payable-on-death beneficiary
• A home or land owned in the decedent's name alone or co-owned as tenants in common where the right of survivorship doesn't apply
• Investments, stocks, and bonds owned by the decedent alone
• Tangible personal property including clothes, jewelry, household furniture, cars, RVs, and TVs

What Assets Avoid Probate?

Some assets do not require a probate proceeding and go directly to the co-owner of the property or the designated beneficiary. Examples of assets that avoid probate include:

• Bank and credit union accounts with Payable on Death (POD) or Transfer on Death (TOD) document stating the beneficiary
• A home or land owned with another as joint tenants with right of survivorship, sometimes called tenancy by the entirety for married couples. At the decedent's death the property is automatically owned entirely by the remaining joint tenant(s).
• Retirement accounts or life insurance policies with previously designated beneficiaries
• Property in a living trust or revocable trust

Estate Taxes

The Tennessee Inheritance Tax exemption is steadily increasing to $2 million in 2014 to $5 million in 2015, and in 2016 there’ll be no inheritance tax. Until this estate tax is phased out, the minimum tax rate for estates larger than the exemption amount is 5.5% and the maximum remains 9.5%.

What Other Taxes Must be Paid?

The administrator of the estate must pay any taxes owed by the decedent at his death or owed by the estate until it closes. The taxes vary based on the circumstances of the estate, but are likely to be:

• Property taxes owed by the decedent
• The decedent's final income tax return
• Estate income tax, if there was income made by the estate after the decedent's death

Where Can I Get Help?

Probate matters in Tennessee can be confusing. You technically can represent yourself in probate court in some circumstances, but it’s a difficult undertaking. Tennessee courts won't allow a fiduciary (an executor or administrator) to be self-represented, as the fiduciary represents others (heirs, beneficiaries, or creditors). Therefore, you may need to consult with a Tennessee probate attorney.