Category: Estate Planning

• What is a Testamentary Trust?

  

  When it comes to estate planning, you may have heard of a Testamentary Trust. This type of Trust can provide for your loved ones while ensuring your assets are managed according to your wishes after death. But many people misunderstand how this type of Trust works and how to create one. Trusts are highly versatile…

  

  When it comes to estate planning, you may have heard of a Testamentary Trust. This type of Trust can provide for your loved ones while ensuring your assets are managed according to your wishes after death. But many people misunderstand how this type of Trust works and how to create one.

  Trusts are highly versatile estate planning tools. But they’re not for everyone. Their usefulness and value depend on what your objectives are. Also critical is proper funding of the Trust, which many people overlook.

  Let’s run through how a Testamentary Trust works, who they might benefit, and how they compare to other types of Trusts.

  What is a Trust?

  Before discussing the Testamentary Trust, let’s first define a Trust more generally. A Trust is a legal arrangement between three parties: Settlor, Trustee, and Beneficiaries.

  The Settlor creates the Trust. The Trustee manages the assets in the Trust. And the Beneficiaries receive the benefits of the Trust.

  There is a fiduciary relationship between the Trustee and the Beneficiaries. The Trustee must act in their best interest with the assets held in the Trust.

  Trusts usually have a written instrument, with the provisions covering a vast array of potential situations. This includes who the parties to it are, the governing state law, Beneficiary rights, Trustee powers, and the ultimate plan of distribution.

  There are two types of Trusts (for purposes of this article): Living and Testamentary. To read more about Living Trusts, you may read another of ours article here.

  How to Create a Testamentary Trust

  

  Creating a Testamentary Trust begins with executing a Last Will & Testament. The Testator (person making the Will) works with an attorney to draft it. He or she then signs the Will with two witnesses, who also sign it. 

  The Trust in the body of the Will itself. There are specific Articles outlining the terms of the Trust, including the Trustee, Beneficiaries, and how to manage and distribute assets.

  A Testamentary Trust does not exist during one’s lifetime. It exists only after death. The Will must go through probate in order to create the Trust. Probate is a court-supervised process that validates the Will and settles the estate.

  If the Testator is living and has the required legal capacity, he or she can change the Will and its Trust provisions at any time. This allows individuals to adjust their plans as circumstances change.

  Probate can be a time-consuming process, though. This may delay the funding of the Trust. Despite this, Testamentary Trusts remain a practical solution for many estate planning needs.

  Who Can Benefit from a Testamentary Trust?

  Testamentary Trusts can work for a variety of individuals and families. One common scenario involves married couples with “mirror image” estate plans. Each spouse’s Will gives their entire estate to the survivor as the primary disposition plan.

  But if they both die simultaneously, then their Wills each create a Testamentary Trust for their Beneficiaries. This is usually their children.

  This type of Trust ensures that their children are cared for and that a responsible party oversees things. The Trustee invests the assets until the children reach an appropriate age or milestone. The Trustee may also make some distributions, depending on the Trust’s terms.

  Other individuals who might benefit from a Testamentary Trust include:

  • Single parents: This type of Trust is less expensive than a Living Trust, but still provides an avenue to provide for minor children.
  • Blended families: These trusts can help ensure children from prior relationships are provided for while balancing the needs of a current spouse.
  • Children with special needs: A Testamentary Special Needs Trust can protect a Beneficiary’s eligibility for government benefits.
  • Those concerned with asset protection: Testamentary Trusts can include provisions to shield their Beneficiaries from creditors, divorce, or wasteful spending.

  Testamentary Trust vs. Living Trust

  

  A Testamentary Trust and a Living Trust differ in their timing of creation. The Settlor of a Living Trust creates it during his or her lifetime, as the name implies. The Trustee, often the Settlor, manages assets in the Trust immediately.

  A Testamentary Trust, on the other hand, is dormant until the Testator’s death and completion of probate. This means there is a longer process to fund a Testamentary Trust as opposed to a Living Trust.

  Testamentary Trusts require less work upfront to put in place. There’s no need to retitle assets after you execute the Will that has the Trust. But probate is required, which can add substantial work and expense later on.

  Living Trusts avoid probate. But they are more expensive and require more effort to set up and maintain. Choosing between the two depends on your priorities and circumstances.

  Pros and Cons of a Testamentary Trust

  As with anything, each and every estate planning option has benefits and drawbacks. These are just a few for Testamentary Trusts.

  Pros:

  • Easier and less expensive to set up compared to Living Trusts.
  • Flexible, as the Testator can amend his or her Will at any time as long as there is legal capacity.
  • Effective for specific scenarios, especially for young families with mirror-image type estate plans.

  Cons:

  • Requires probate, which can be time-consuming and is open to public inspection.
  • Updating Beneficiary Designations at financial institutions can be cumbersome, as some may not work well with Testamentary Trusts.
  • Delays in funding the Trust may occur due to the probate process.

  Final Thoughts on Testamentary Trusts

  Testamentary Trusts are a fairly cost-effective and practical estate planning tool. They work well for young families and individuals with specific needs, such as planning for minor children, blended families, or asset protection.

  Just like with any estate planning decision, it’s important to understand how this tool works and to have legal counsel working with you so you make the right choice. What’s right for another family may not be right for yours.

  If you’re considering a Testamentary Trust, Connell Law, PLLC can help you determine if it’s right for you. We serve Rutherford County, Tennessee and the surrounding area in the areas of estate planning and probate.

  Contact us today to request a free consultation for your tailored legacy plan.

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• Bridge the Gap: Your Attorney & Financial Advisor Should Collaborate

  

  Both an estate planning attorney and a financial advisor play a crucial role in building and protecting wealth. But these professionals frequently do not communicate with each other about how to best serve their mutual clients. This shouldn’t be happening. By having your attorney and advisor collaborate, you can have a more comprehensive and effective…

  

  Both an estate planning attorney and a financial advisor play a crucial role in building and protecting wealth. But these professionals frequently do not communicate with each other about how to best serve their mutual clients. This shouldn’t be happening.

  By having your attorney and advisor collaborate, you can have a more comprehensive and effective strategy to carry out your goals. Here’s how this teamwork can benefit you and how you can foster it.

  Harmonizing Your Legal Documents and Financial Portfolio

  Your attorney and financial advisor look at your situation in different ways. This is because of the distinct training that each receives.

  Your attorney may mainly focus on getting the structures in place properly so that your assets are managed as you desire. After all, if there is no clear direction, assets may go to undesired places.

  On the other hand, your financial advisor is likely more focused on funding your plans. And odds are that your retirement is the primary consideration. This will include topics like your investment portfolio, insurance needs, tax liabilities, and the like.

  Both of these topics necessarily have to be addressed. But neither professional is likely to have all the necessary skills (or licensure) to handle all parts of your legacy plan. Attorney and advisor should be on the same page when it comes to both structuring and funding your plan.

  Let’s say you create a Living Trust. There is a lot of work that goes into the process of setting up a Trust.

  Your attorney will advise you to fund the Trust, primarily meaning assigning and retitling assets to the Trust. This means executing a new deed for your house, changing bank account ownership from individual to trust, and assigning business interests to the Trust in a written instrument.

  But you can’t forget about Beneficiary Designations. This is largely your financial advisor’s territory: life insurance, retirement accounts, and brokerage investments.

  If your advisor doesn’t know that you created a Trust, he or she won’t know to update your beneficiaries so that the Trust works as you intend.

  Collaborating helps assure the attorney that the plan is funded, while also assuring the financial advisor that your assets have a clear destination.

  Ongoing Monitoring and Adaptation

  

  Life is full of changes. Whether it’s marriage, divorce, birth of a child, or acquiring new assets, life is almost always in motion. Your estate plan and financial strategy need to adapt accordingly.

  Regular updates and communication between your attorney and financial advisor ensure that your estate and financial plans remain aligned with your evolving needs.

  Odds are you speak more frequently with your financial advisor than your estate planning attorney. But if there is a pre-existing relationship between the two, your advisor will be in a position to update your attorney about these major changes. This will help your attorney know sooner when changes become necessary.

  You can also encourage your attorney and advisor to check in regularly to keep an open line of communication. This keeps your plans current, and also reduces the risk of professional liability for each of them. By having at least two sets of eyes on your situation, you can avoid problems before they ever happen.

  Carrying Out Your Plan

  A huge, and all too common, mistake that many people make is not sharing the details of their plans with anyone. After signing legal documents, they’re hidden away and seem to disappear. Without seeing the contents of your documents, your beneficiaries cannot get the legacy you intend to leave.

  By having your attorney and advisor work together, one of the measures you can take is sharing copies of documents. If one of the two professionals retires, dies, or is otherwise not reachable, there are other places where these documents are still accessible.

  These professionals have fiduciary duties to protect your information. This adds another layer of peace of mind regarding your plans. All it takes is sharing electronic copies of everything after you sign.

  Upon your death, your financial advisor can then quickly take action to alert your family members, executor and/or trustee, and your attorney as well.

  Remember, we cannot use a Ouija board to ask what your wishes were. That ship will have already sailed. Your attorney, executor, trustee, and other involved persons have to know where your wishes are laid out and how to access those documents.

  When both attorney and financial advisor collaborate, there is a higher likelihood that your beneficiaries will have clarity about what to do.

  Take the Initiative with Your Attorney and Financial Advisor

  

  As the saying goes, teamwork makes the dream work.

  When you start the estate planning process, tell your financial advisor who you are meeting with. When you do the legal consultation, tell the attorney who your financial advisor is. Then either do an email introduction, or give each of them the other’s contact information so they can connect.

  It’s been our experience that financial advisors find this approach refreshing. By connecting, there may also be new opportunities down the road for collaboration on other client matters.

  At the end of the day, your legacy plan is in your hands. But it helps to have a helping hand, or two. Get your estate planning attorney and financial advisor together so they can serve you in a more holistic way.

  Connell Law, PLLC serves residents of Rutherford County, Tennessee and the surrounding area with estate planning, probate, and small business legal services. Contact us today to request a free consultation.  

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• The Role of a Prenuptial Agreement in Estate Planning

  

  A prenuptial agreement is more than just a tool for protecting assets in divorce. It can also be very useful in a comprehensive estate plan. For couples, having a prenuptial agreement can prevent future conflicts and ensure a smoother transition of assets. Whether it’s a first (and hopefully only) marriage or a blended family, a…

  

  A prenuptial agreement is more than just a tool for protecting assets in divorce. It can also be very useful in a comprehensive estate plan. For couples, having a prenuptial agreement can prevent future conflicts and ensure a smoother transition of assets.

  Whether it’s a first (and hopefully only) marriage or a blended family, a prenup can lay out expectations and resolve problems ahead of time.

  Here is an overview of what a prenuptial agreement does and how it fits into estate planning.

  What Is a Prenuptial Agreement?

  A prenuptial agreement, or an antenuptial agreement, is a contract signed before a marriage. It outlines how a couple would divide assets and debts if the marriage ends. It can also address financial responsibilities during the marriage.

  In Tennessee, these agreements must be in writing, signed by both parties, and based on full financial disclosure to be enforceable. The parties must enter the agreement freely, knowledgeably, and in good faith, without any duress or undue influence.

  The courts generally enforce prenuptial agreements as written if the above criteria are met. Normal contract remedies are available to enforce it.

  Common Provisions in Prenuptial Agreements

  Prenuptial agreements can cover a wide range of financial issues. Some common provisions include:

  • Division of Property: Deciding who gets what in the event of divorce or death. This can include property acquired before and during the marriage, including any appreciation on such assets.
  • Debt Responsibility: Protecting one spouse from the other’s premarital debts. Making one spouse responsible for the other’s premarital debts is likely not a fair outcome.
  • Inheritance Rights: Ensuring specific assets go to children from a prior relationship. This is especially critical for blended families, so that one side of the family is not effectively disinherited.
  • Rights to Business Interests: Safeguarding ownership of a family business or professional practice. If a couple divorces, the business is an asset for purposes of equitable division, which could be a serious problem for the business owner spouse.
  • Spousal Support: Setting limits or waivers on alimony payments, such as amounts of a length of time. But spouses cannot waive or limit child support, as this belongs to the children.

  By clearly defining these terms, a prenuptial agreement helps avoid future disputes and confusion. If two spouses divorce, there is a lot less work to do during divorce proceedings on property division. Which means far less in expenses, like legal fees.

  Prenuptial Agreements for First-Time Marriages

  

  When getting married, we all hope that the vows made truly are for life. But life is often messy, and things sometimes don’t go as expected.

  Many people think that prenuptial agreements are only for the affluent or those with prior marriages. But they can benefit couples without a prior marriage, too.

  For example, a prenuptial agreement can:

  • Clarify Financial Expectations: Address how the couple will manage their expenses during the marriage. Many couples fully combine their finances, but some may not wish to do this.
  • Protect Individual Assets: Ensure premarital property remains separate or define what types of assets may become marital property. Without prior agreement, property that each owned before the marriage may be subject to division during divorce.
  • Direct Estate Planning: Coordinate with Wills, Trusts, and Beneficiary Designations for seamless asset distribution. The prenup can also have provisions for if the surviving spouse gets remarried in order to protect the children’s rights.

  Starting a marriage with clear financial agreements can reduce future financial uncertainty. The higher the dollar amount that’s at stake, the more advisable a prenup is. But this is also true for relationships with past volatility, such as previous breakups.

  Prenuptial Agreements for Blended Families

  Blended families often face complex estate planning challenges. All too often, when a surviving spouse remarries, the new spouse may influence the other to leave him or her all assets.

  This could effectively disinherit the children that were born in the prior marriage, with such assets then going to the new spouse’s own children instead.

  A prenuptial agreement can help to avoid that possibility. It can do this by:

  • Preserving Children’s Inheritance: Ensure children from a previous marriage receive specific assets or financial support.
  • Avoiding Conflicts Among Heirs: Define property division upfront to prevent disputes between a surviving spouse and stepchildren.
  • Coordinating with a Trust: Use a prenuptial agreement to guide the terms and interpretation of a marital trust or family trust.

  In this day and age, blended families are common. A well-drafted prenuptial agreement can be a vital part of protecting everyone’s interests. Not just the spouses’ interests, but also the inheritance rights of their children.

  How a Prenuptial Agreement Fits into an Estate Plan

  

  A prenuptial agreement works hand-in-hand with other estate planning tools. For example, it can:

  • Complement Wills and Trusts: Ensure the prenuptial agreement aligns with other legal documents.
  • Guide Beneficiary Designations: Clarify how to distribute retirement accounts and insurance policies.
  • Prevent Legal Challenges: Reduce the risk of disputes or misunderstandings after a spouse’s death, as the spouses have already made the decisions ahead of time.

  By addressing these issues in advance, families can have greater peace of mind knowing their estate plan will respect both spouses and the children from each relationship.

  Conclusion

  Prenuptial agreements can play a vital role in estate planning for Tennessee couples. They protect assets, clarify financial responsibilities, and ensure fairness in complex family situations.

  Whether you’re getting married for the first time or blending families, a prenuptial agreement can lay the groundwork for efficiently resolving future problems. Though it is sometimes controversial, especially for those with strong religious convictions about marriage, in some situations it can be well worthwhile to put a prenup in place.

  If you’re considering a prenuptial agreement, Connell Law, PLLC can assist in drafting one or reviewing a proposed agreement. Reach out to us today to request a free consultation.

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• Corporate Transparency Act Blocked Nationwide; What You Need to Know

  

  We previously reported that a federal court ruled that the Corporate Transparency Act is unconstitutional. But the decision only applied to the parties in that case. On December 3, another federal court blocked the Corporate Transparency Act. The good news is that this ruling applies nationwide. The case, Texas Top Cop Shop, Inc., et. al.…

  

  We previously reported that a federal court ruled that the Corporate Transparency Act is unconstitutional. But the decision only applied to the parties in that case. On December 3, another federal court blocked the Corporate Transparency Act. The good news is that this ruling applies nationwide.

  The case, Texas Top Cop Shop, Inc., et. al. v. Garland, is in the Eastern District of Texas. The Plaintiffs sued the federal government earlier this year arguing that Congress does not have the power to pass the Act, and that the Act violates their individual Constitutional rights.

  After many months of filings and hearings, the court issued a preliminary injunction. This means that the court has blocked the Corporate Transparency Act. The ruling also puts a pause on the rule that requires most small businesses to submit the Beneficial Ownership Information Report (BOIR).

  Let’s discuss a few of the key parts of this decision and what may happen next.

  What is the Corporate Transparency Act?

  In 2021, Congress passed the Act with the purported goal of combatting money laundering and the financing of terrorism. It requires most small business owners to submit a report to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

  The report must provide information about the business’s “beneficial owners.” A beneficial owner is someone who has at least 25% ownership of such a business, or who exercises substantial control over the business.

  Reporting companies must disclose information such as who formed the company, the state of formation, the company’s address, tax ID number, and who the beneficial owners are. Individuals must submit their personal address or business address, state ID number and type, and an image of that ID document.

  The law’s requirements are quite invasive. FinCEN would be storing tens of millions of records, with millions more being added every year. Failure to comply could lead to fines of $500 per day, and even federal prison if noncompliance was willful.

  Why Did the Court Block the Corporate Transparency Act?

  

  The Plaintiffs argued that the Act is not a proper exercise of Congress’s power. They also argued that the Act violates their Constitutional rights under the First and Fourth Amendments.  

  The court ultimately ruled on structural grounds in blocking the Corporate Transparency Act. It did not address the individual rights arguments.

  The short and sweet of it is that neither the Interstate Commerce Clause nor the Necessary and Proper Clause empowers Congress to pass this law.

  The Supreme Court has ruled that Congress can regulate interstate commerce in certain ways. This includes regulating the channels of interstate commerce, the instrumentalities of interstate commerce, and activities that substantially affect interstate commerce.

  Using this reasoning, the court found that the Act did not regulate channels or instrumentalities of interstate commerce. There is not a particular object of the Act, unlike other cases that dealt with, for example, regulation of transportation or a specific commodity.

  It also found that the Act does not substantially affect interstate commerce. The Act does not regulate a commercial act, but merely the creation of an entity with a government agency. There is not any distinctly commercial activity by filing a document with the secretary of state to form an LLC or corporation.

  The fact that a company is a company does not knight Congress with some supreme power to regulate them in all aspects—especially through the CTA, which does not facially regulate commerce.

  The court also rejected the government’s Necessary and Proper Clause argument. That clause in the Constitution gives Congress the authority to carry out the powers enumerated to it.

  But the clause’s authority does not extend so far as to require small businesses to divulge owners’ sensitive information simply because a company exists. There has to be some commercial activity involved to bring in Congress’s power over interstate commerce—a “jurisdictional hook.”

  In blocking the Corporate Transparency Act, the court also rejected arguments that the Act regulates foreign commerce and is a part of the government’s tax collection efforts.

  Do Businesses Need to File the Beneficial Ownership Information Report (BOIR)?

  The official order of the court blocks the government from enforcing the Corporate Transparency Act. The order also issues another restraint—a stay—on the BOIR compliance deadline of January 1, 2025.

  [T]he CTA, 31 U.S.C. § 5336 is hereby enjoined. Enforcement of the Reporting Rule, 31 C.F.R. 1010.380 is also hereby enjoined, and the compliance deadline is stayed … Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.

  Unlike the other case out of Alabama, the Act is now blocked across the country. This means that no business needs to file the BOIR until the court issues a contrary order, or a higher court reverses this ruling.

  What Happens Next?

  

  The Alabama case is currently on appeal at the 11^th Circuit. That court heard oral arguments in the fall and will likely issue a ruling sometime in early to mid-2025. The decision out of the Eastern District of Texas may speed up that timeframe.

  Keep in mind that this is a preliminary injunction, not a final order. The injunction prevents enforcement while the litigation continues. So while the Corporate Transparency Act is blocked for now, its requirements could be back in the future.

  The federal government appealed the injunction on December 5th, as expected. The case now goes to the Court of Appeals for the 5^th Circuit. With the composition of that appellate court, the district court’s opinion will likely be upheld.

  No matter how the 5^th Circuit rules, that ruling would also likely be appealed to the U.S. Supreme Court. By that point, the 11^th Circuit may also have its opinion published. If the 5^th Circuit and 11^th Circuit disagree, then it becomes highly likely that the Supreme Court would take the case.

  But remember, any appeals from the court in Texas only deal with the preliminary injunction. They do not involve a final order from a district court. On the case shall go.

  Final Thoughts on the Act Being Blocked

  The future of the Corporate Transparency Act is uncertain. But for now, small businesses have a big win under their belts. The Act’s requirements are quite invasive and onerous. Few small business owners, in our experience, are even aware that this law exists.

  Connell Law, PLLC is committed to helping entrepreneurs earn a good living by serving their customers. It is our position that the law should not compel entrepreneurs to disclose sensitive information to the federal government under threat of excessive fines and a prison sentence.

  Unless the government has a reason to investigate a given business for criminal activity or civil violations, business owners are entitled to their privacy. We’re pleased that this federal court blocked the Corporate Transparency Act for all reporting companies.

  We will continue to monitor these proceedings and keep our audience and clients informed. Please reach out to request a consultation if you have small business legal needs in Middle Tennessee.

  This article has been updated since the original publication date.

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• The Importance of Estate Planning for Young Families

  

  When you’re young, healthy, and focused on building your career and family, estate planning may feel completely irrelevant. But planning for “what ifs” isn’t just for the most affluent or for the end of life. Estate planning is just as vital for young families, too. Proper estate planning gives peace of mind that your loved…

  

  When you’re young, healthy, and focused on building your career and family, estate planning may feel completely irrelevant. But planning for “what ifs” isn’t just for the most affluent or for the end of life. Estate planning is just as vital for young families, too.

  Proper estate planning gives peace of mind that your loved ones are protected, and your wishes will be honored. Especially when it comes to families with minor children, having your affairs in order prevents a time of grief from turning into a legal nightmare.

  Let’s discuss three key reasons why young families need to get their estate plans in place.

  An Estate Plan Will Manage Assets for Minor Children

  If you have minor children, one of your top priorities is protecting them. Estate planning considers what will happen to them if you and your spouse die unexpectedly. Some important documents for this are your Will and/or Trust.

  A Will directs the courts and your Executor on how to distribute your assets at death. This is generally necessary for assets that don’t pass by joint ownership or beneficiary designation.

  Married couples often set up mirror image Wills. The mirror image plan generally has everything first going to each other, and then to their children.

  But minor children cannot own property in their own names. This is why young families need estate planning regardless of age or wealth level.

  A Trust should hold your children’s inheritance until they are mature enough to manage it. This prevents the need for a guardianship estate with the court. It also avoids the possibility that an 18-year-old suddenly will receive a large sum of assets when he or she is not ready for the responsibility.

  The Trust can be a Living Trust or a Testamentary Trust. A Living Trust comes into effect during your life, and while you are living you place assets into it (funding the Trust). A Testamentary Trust is included in a Will and only comes into effect upon your death.

  Whether it’s a Living Trust or Testamentary Trust, young families need an estate plan with some type of Trust ready to handle assets on your children’s behalf.

  Young Families’ Estate Plans Must Name a Guardian for Minor Children

  

  In Tennessee, parents are the default guardians of minor children. But if both parents are deceased, someone has to raise those children to adulthood. This means going to court and having a judge issue an order naming a Legal Guardian.

  Without a clear plan in place, the judge has to decide who this person will be. But you can make this decision ahead of time in your Will. This prevents a situation where someone who does not share your values has custody of your children.

  A well-drafted Will for young families contains a clause for Guardianship. It is wise to include a primary and alternate Guardian. In almost all situations, the court honors the nomination as long as the nominee is fit to serve.

  This puts you in control of who will raise your children, so they will be in a household that shares your values.  

  Making Healthcare and Financial Decisions Easier

  Estate planning for young families also includes preparing for emergencies that can happen during life. What if you or your spouse becomes seriously ill or injured? Perhaps even permanently incapacitated?

  A comprehensive estate plan includes Powers of Attorney and a Living Will. These documents allow specified people to handle critical financial and medical decisions on your behalf.

  A key time to have Powers of Attorney and a Living Will in place is right before giving birth to a baby. There are a lot of variables with childbirth. Sometimes, though a natural birth may be the plan, an emergency C-section may become necessary. A C-section is a major surgery.

  By having these documents in place, your Agent will be able to step in and help with your care. Spouses usually name each other as the primary, and a trusted family member or friend as the alternate.

  Without these legal documents, a Conservatorship may become necessary. This is a stressful legal proceeding to gain authority over the person’s healthcare and/or financial interests. Young families that have done estate planning avoid the need to get the courts involved, saving everyone money and substantial hardship.  

  Closing Thoughts on Estate Planning for Young Families

  

  Young families often have a lot on their plates, especially if they have multiple children. While we need to keep up with day-to-day responsibilities, we cannot forget to plan for the possibility of life happening.

  We all hope to live many decades. But tragedies happen, and people can pass away in the prime of life or become permanently disabled. Not having a plan for this situation can be catastrophic.

  No matter the age or wealth level, young families need to have estate plans in place. The plan will provide for minor children, handle assets on their behalf, and help with managing the family’s affairs during life.

  Connell Law, PLLC provides estate planning to residents of Rutherford County and the surrounding area. To request a free consultation, reach out to us today.

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• Four Common Estate Planning Mistakes to Avoid

  

  When doing your legacy plan, diligence pays off. Avoiding common pitfalls can save your loved ones from unnecessary confusion, financial burden, and legal disputes. While we all know this in theory, taking steps to prevent estate planning mistakes can be difficult to navigate if you’ve never done it before. While there are many things that…

  

  When doing your legacy plan, diligence pays off. Avoiding common pitfalls can save your loved ones from unnecessary confusion, financial burden, and legal disputes. While we all know this in theory, taking steps to prevent estate planning mistakes can be difficult to navigate if you’ve never done it before.

  While there are many things that “can go wrong” in the estate planning world, certain types of mistakes make up the bulk of the problems. Here are four common mistakes that many people make in estate planning, and how you can avoid them.

  1. Not Doing Your Estate Plan is a Big Mistake

  One of the most common and significant mistakes is simply not having your own estate plan. Without a Will or Trust, Tennessee’s law of intestate succession determines the distribution of your assets. This may not align with your wishes.

  Especially if you have minor children, this creates complexities in managing your assets. Those minor children may need guardianship estates set up and managed until they reach age 18.

  Even during life, failing to have a plan is problematic. If you are incapacitated and cannot make decisions for yourself, who can step in? Who is going to help with paying your bills or making healthcare decisions?

  Without a Durable Power of Attorney, there may have to be a conservatorship so that another person can handle your affairs. This is a difficult proceeding for everyone involved.

  Regardless of wealth level, every adult needs even a basic estate plan in place. As the saying goes, failing to plan is planning to fail.  

  2. Failing to Update Your Estate Plan When Needed

  

  Estate planning is inherently dynamic. As your life changes, your estate plan may also need to change. Major life events—such as marriage, divorce, birth of a child, or the acquisition of significant assets—can all warrant updates.

  Failure to review and update your legal documents can leave outdated provisions in place. This means your loved ones may have to navigate confusing waters and spend a significant amount in attorney fees to figure things out.

  For example, we have seen a situation where someone executed a Will and then never made any changes for 30 years. But during that time, this person divorced, moved states, and remarried. Sorting out this type of situation is an unnecessary and avoidable burden.

  Regularly looking over your estate plan ensures that it always reflects your current situation and wishes. We recommend reviewing your legal documents every three years, or right after a major life change.

  3. Not Properly Designating Beneficiaries

  Another common estate planning mistake is failing to properly designate or update beneficiaries. Beneficiary designations apply to assets such as life insurance policies, retirement plans, and payable-on-death bank accounts.

  A beneficiary designation overrides what is in a Will or Trust. This is because the designation is a contractual relationship between you as the account owner and the financial institution.

  An all-too-common example of failure to update beneficiaries comes in divorces. After a divorce, one may neglect to correct beneficiaries so that the ex-spouse is not the primary.

  If this happens, absent special provisions in a divorce decree or agreement, then the asset is likely going to the ex-spouse. Not a situation your family is going to be happy about.

  We recommend verifying your beneficiary designations annually. Unlike executing estate planning documents, it’s much easier to change beneficiary designations. You may have made these designations and simply don’t remember. Check them frequently and correct quickly.

  4. Using Cheap Computer Programs for Estate Planning Documents

  

  Many people turn to inexpensive, DIY estate planning software to create their legal documents. While these programs might seem cost-effective upfront, they often fail to address the very real complexities of putting an estate plan together.  

  Estate planning is not a one-size-fits-all task. Using generic documents can result in costly errors or legal issues due to deficiencies.

  Something we frequently see is computer-generated documents that are not properly executed. Just a quick look at the documents reveals critical deficiencies that leave them ineffective.

  These computer-generated documents may also fail to appropriately plan for business owners or parents of minor children. Important provisions in Wills or Trusts may be absent without professional guidance.

  These programs are cheap, and that’s part of the attraction. But being too cheap often ends up being quite expensive. Especially when it comes to legal matters.

  Final Thoughts on Common Estate Planning Mistakes

  Estate planning mistakes are tragically common. And they can have serious consequences for you and your loved ones. Avoiding these common pitfalls requires careful planning, regular reviews of your estate plan, and professional guidance.

  Working with an attorney provides a dynamic opportunity to craft a plan that is free from these estate planning mistakes. If you’re ready to protect your assets and provide clarity for your loved ones, reach out to us to request your free estate planning consultation.

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• Connell Law, PLLC Named Rutherford County’s Favorite Law Firm in 2024 Ruthie’s Awards

  

  Murfreesboro, Tennessee — Tuesday, October 15th was the annual banquet for the Ruthie’s Awards. Readers of the Daily News Journal, a local USA Today affiliate, voted for two weeks this past summer for businesses in various categories. The categories include financial advisor, insurance agent, local coffee shop, bakery, cleaning service, and a host of others.…

  

  Murfreesboro, Tennessee — Tuesday, October 15th was the annual banquet for the Ruthie’s Awards. Readers of the Daily News Journal, a local USA Today affiliate, voted for two weeks this past summer for businesses in various categories.

  The categories include financial advisor, insurance agent, local coffee shop, bakery, cleaning service, and a host of others. Several hundred people representing their businesses attended the awards banquet.

  Connell Law, PLLC was a nominee for favorite law firm in Rutherford County. After voting was complete, we were notified that we were a finalist in the awards.

  At the banquet, Connell Law, PLLC was announced as the winner of the award.

  

  “This was a really amazing thing to experience,” said Founding Attorney Seth Connell.

  “I’ve managed to connect with so many awesome people in social and professional settings. The way that everything has transpired shows me that being here was a Divinely ordained thing. There’s no way we could have done this on our own. All glory be to Christ.”

  “I’m so thankful to be here. This community has been so welcoming and we’ve managed to fit right in. I’ve still got a lot of growing to do, but I am so grateful for how many people have put their trust in me and my practice to guide them with estate planning and business matters.”

  Connell Law, PLLC appreciates the support that our clients, referral partners, and followers have given. Winning the award for favorite law firm in the Ruthie’s Awards is a true honor. We look forward to serving this community for many years to come.

  And congratulations to several of our friends and referral partners who also won awards in their respective categories.

  Read more about Founding Attorney Seth Connell here.

  Our firm provides Rutherford County and the surrounding area with estate planning, probate, and small business legal services. To request a free consultation, reach out to us today through our contact page.

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• How to Reduce the Risk of Conflict in Your Estate Plan

  

  An estate plan provides peace of mind that your wishes direct your legacy, instead of the government’s wishes. But even estate plans that are otherwise solid can involve disagreements among Fiduciaries and Beneficiaries. Especially during a time of grief, conflict about an estate plan is the last thing that a family needs. Though always possible,…

  

  An estate plan provides peace of mind that your wishes direct your legacy, instead of the government’s wishes. But even estate plans that are otherwise solid can involve disagreements among Fiduciaries and Beneficiaries. Especially during a time of grief, conflict about an estate plan is the last thing that a family needs.

  Though always possible, there are some ways to be proactive and get ahead of potential conflicts. We’ll recommend three specific practices to reduce the likelihood of conflict in your estate plan.

  Be Transparent with Your Beneficiaries and Fiduciaries

  An important way to prevent family conflict is through open communication. Discussing your estate planning decisions with your Fiduciaries (Agent, Executor, and/or Trustee) and Beneficiaries now reduces the risk of misunderstandings later.

  This doesn’t necessarily mean that you disclose all details about your assets. This certainly would not be appropriate if your Beneficiaries are minors (through a trust, hopefully).

  But especially with mature adult Beneficiaries and your Fiduciaries, they should understand what your wishes are, and even some of the rationale behind your decisions. Explaining your choices allows you to address concerns early and foster understanding before your plan is put into action.

  If a Beneficiary finds out about your plan after you’re gone, he or she may take issue with any conditions attached to the legacy, or the timeframe for distributing it.

  Discussing this early doesn’t guarantee conflict avoidance. But it affords the opportunity to hash things out now while you are here. As the saying goes, conflict delayed is conflict multiplied.

  Have Clear Instructions to Prevent Conflict in Your Estate Plan

  Vagueness in an estate plan can cause disputes. Make sure your estate plan provides specific, detailed instructions on asset management and distribution, as well as the roles that each person plays.

  Avoid using broad or ambiguous terms. Clear language reduces the chances of misinterpretation and potential conflicts.

  For example, a trust distribution provision that many of our clients choose is a “HEMS” standard—health, education, maintenance, and support. This distribution standard often lasts for a period of time, such as until age 25 or 30. Upon reaching that age, that’s when the Trustee would distribute the remaining balance in the trust.

  Until that point, the Beneficiary knows what he or she is and is not eligible for. And if you’ve taken our first recommendation, he or she also knows the reasons why.

  By contrast, it’s probably not a good idea to use a standard that looks like this:

  

  Humor of this aside, while there is some direction on what constitutes a “Douchebag,” the Executor and Trustee have a lot of discretion on what this means.

  If the Executor or Trustee simply has a personal problem with a Beneficiary, is that sufficient to make that Beneficiary a “Douchebag?”

  Who knows.

  It’s better to set up clearer language about what this standard means. And perhaps in a less pejorative way.

  Remember, Wills are public documents. If you publish derogatory information about someone in a Will, your estate could be liable for defamation.

  Bottom line: being clear is being kind. If you have conditions, set them out in manner that’s easy to understand.

  Work with an Estate Planning Attorney

  Even with transparency and clarity, an estate plan is a legal document that requires expert guidance. An estate planning attorney can help you prepare a plan that is legally sound and free from common mistakes that often lead to disputes.

  An important aspect of putting estate planning documents together is the execution. The law often has execution formalities for these documents to be effective. The average person doesn’t always know this and may make critical mistakes that leave their documents invalid.

  For example, a common belief is that a signature and notary acknowledgement is sufficient for a Last Will & Testament. But Tennessee law doesn’t actually require a notary acknowledgement.

  A Will is valid only if the Testator (creator of the Will) signs it in the presence of two witnesses, and those witnesses sign it in the Testator’s presence and each other’s presence.

  When you work with an estate planning attorney, conflict is less likely because this professional will guide you through the process in a comprehensive manner. Beneficiaries and Fiduciaries also have some reassurance that an attorney may catch problems like a lack of legal capacity or undue influence.

  It’s more than just spitting out documents. This process is about creating something that clearly covers your wishes and avoids common pitfalls.

  An attorney who regularly does estate plans can anticipate many issues and prepare your legal documents accordingly. Online document preparation software does not do this. User error can often lead to expensive disasters.

  Final Thoughts on Avoiding Conflicts in Your Estate Plan

  

  Reducing the risk of conflict in an estate plan involves careful planning and expert advice. There is no absolute way to prevent conflict. Someone may still want to stir up trouble no matter your efforts. But you can make wise decisions now that reduce the risk of things going wrong later on.

  By communicating openly with Beneficiaries and Fiduciaries, being clear in your legal documents, and working with an attorney, you can protect your family from preventable disputes.

  Connell Law, PLLC provides residents of Rutherford County, Tennessee and the surrounding area with estate planning. Reach out to us today to request a free consultation.

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• Who To Name as Your Executor: Key Considerations

  

  When setting up an estate plan, a Last Will & Testament is almost always involved. As we have explained in another article, your Will covers assets that must go through probate. But this isn’t automatic. Someone has to carry out your plan—that’s your Executor. You should think carefully about who you want to name as…

  

  When setting up an estate plan, a Last Will & Testament is almost always involved. As we have explained in another article, your Will covers assets that must go through probate. But this isn’t automatic. Someone has to carry out your plan—that’s your Executor. You should think carefully about who you want to name as Executor.

  Choosing your Executor is a critical decision. Contrary to what many think, this is not just an honorary title. It’s an important responsibility. And it involves a significant amount of work. Let’s discuss some key considerations when thinking about who your Executor should be.

  Your Executor Needs to be Diligent and Action-Oriented

  Being an Executor means there are important responsibilities to carry out. These include consulting with a probate attorney, filing a petition to probate the deceased person’s Will, gathering assets, creating an inventory and accounting, handling debts and expenses, and distributing assets.

  While a probate attorney will help with legal filings and necessary court appearances, the Executor is the one who must do most of the legwork. This means your Executor needs to be someone who will be able to take action promptly and not allow things to linger.

  An Executor owes a fiduciary duty to the Beneficiaries of the Estate. He or she must act with reasonable care to protect their interests. Failure to act can be a breach of fiduciary duty, for which the Executor may be personally responsible.

  Your Executor Should be Financially Savvy

  

  The Estate of a deceased person contains a variety of assets. This may include bank accounts, investment accounts, tangible personal property, businesses, and real estate.

  Because of the variety of matters an Executor may have to deal with, your Executor should have a good grasp on the basics of personal finance.

  If you own a business that will have to be probated, your Executor should also have insight into how your business operates. He or she needs to be capable of making day-to-day decisions to run the business during probate. If this is not so, then the probate court may have to appoint a receiver to handle the business.

  Probate is not where someone should be putting on financial training wheels for the first time. Choose someone who has proven themselves competent with financial and/or business matters.

  Your Executor Needs to be Highly Trustworthy

  Somewhat related to diligence is trustworthiness. You should have the utmost confidence in this person and his or her abilities to get the job done. He or she should have impeccable character and integrity, such that you would trust him or her with your affairs while you are living.

  If you have hesitations about someone being your Executor, you should probably not choose that person. Whatever the reason, if there is something that causes you not to fully trust him or her to get the job done, look for another person to fill this role.

  This is especially important if your Will waives bond. Normally, the law requires an Executor or Administrator to obtain a bond, which can be quite expensive. But many Wills that attorneys prepare waive the need for a bond.

  If the Will waives bond, this means less upfront expense for your Executor. But it also means that there is potentially less recourse if he or she mismanages the Estate. Choosing someone highly trustworthy is a wise way to avoid this problem.

  Your Executor Should Understand Your Family and Values

  

  It’s also a good idea to have an Executor who knows you at an intimate level. This person should understand what your family dynamics look like and what is important to you. And he or she needs to be able to navigate potential conflict among family members and other Beneficiaries of your Estate.

  If there are ambiguities in your Will, your Executor may sometimes have to make judgment calls about what your wishes are. Someone who has known you for a long time would likely be able to think through your values and come to a conclusion that is close to your intentions.

  Your Executor Does NOT Have to be a Family Member

  Almost as relevant as thinking who to name as Executor is thinking who *not* to name. Or, who you don’t *have* to name as Executor.

  While it’s common to name a close family member as Executor, this is not required. In fact, almost anyone can be an Executor, subject to a few limitations for those with certain criminal convictions.

  Viable alternatives may be close friends, an accountant, or financial advisor. Your attorney may also serve in this capacity, if you wish.

  So if you don’t have a family member you fully trust, look to your social circle and professional connections next.

  Final Thoughts on Who to Choose as Your Executor

  Having a competent, trustworthy, and financially savvy Executor provides greater peace of mind about your legacy plans.

  Estate planning conversations often center around “who gets what.” But these conversations should involve more “who does what.”

  Start having conversations about your estate plan with your family now. If you want to have a non-family member as Executor, have a discussion with him or her about the idea. This person needs to know what’s required to carry out these responsibilities.

  While these conversations may be uncomfortable, they are highly important. Don’t push these matters off for tomorrow. Plan today for a more peaceful tomorrow.

  Connell Law, PLLC provides residents of Rutherford County and the surrounding area with legal counsel in estate planning and probate. Reach out to us today to request a consultation.

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• How to Change a Trust in Tennessee

  

  Estate planning is a dynamic process. Life often changes, and that means your estate plan may need updating. Especially if you have a Trust, keeping its provisions in line with your circumstances will provide greater confidence that your wishes are accomplished. A question that often comes up in this context is how to change a…

  

  Estate planning is a dynamic process. Life often changes, and that means your estate plan may need updating. Especially if you have a Trust, keeping its provisions in line with your circumstances will provide greater confidence that your wishes are accomplished. A question that often comes up in this context is how to change a Trust.

  There are two main ways to change a Trust: amendment and restatement. Each serves a different purpose. Let’s explore both options and when one may be used over another.

  For purposes of this article, we will focus on Revocable Living Trusts. In contrast with Irrevocable Trusts, these Trusts are much easier to change. There are also generally no tax consequences for making changes to a Revocable Trust.

  Amendment: Good for Small Adjustments

  A Trust amendment is a simple way to make minor changes. It’s basically an addendum to the original Trust instrument. The amendment only affects the specified provisions. It leaves all other aspects of the Trust unchanged.  

  Amendments are useful for small changes. Common examples include adding or removing a beneficiary, updating a Trustee, or altering distribution terms. A single document of just a few pages is often sufficient to make such a change.

  The benefit of an amendment is its simplicity. It’s a cost-effective way to modify a Trust without much hassle.

  The Settlor of the Trust must have testamentary capacity at the time of making the amendment. This generally means that he or she understands the nature of the document and how it will affect his or her legal interests.

  While good for minor changes, multiple amendments can make interpreting the document challenging. Too many amendments may cause administrative issues or errors during Trust management.

  If there are a substantial number of amendments, it may actually be wise to do a more thorough update to the Trust.

  Restatement: Overhauling the Trust Without Starting Over

  

  Another option to change a Trust is a restatement. A restatement is more comprehensive than an amendment. It involves rewriting the entire Trust instrument. But the Trust itself retains its identity from a legal standpoint.

  A restatement is ideal when there are multiple or substantial changes. For example, if you need to revise many sections of your Trust, a restatement is the cleaner option. The Trust’s original creation date and legal status stay intact, but most of its provisions are new.

  A restated Trust instrument will note the date of the original Trust agreement, and that this new instrument abrogates the terms of the original. The restatement also retains the same name for the Trust so that asset retitling is unnecessary.

  Restating a Trust prevents confusion. The end product is one clean document that avoids the need to juggle multiple amendments. A simpler document will help the Trustee better carry out the Trust’s purpose.

  Which Method Best to Change a Trust?

  Choosing between an amendment and a restatement depends on the changes you need. If you’re making small updates, like adding a beneficiary or changing the Trust’s governing law, an amendment is likely sufficient. It’s a quick and straightforward solution.

  On the other hand, if you have multiple changes or need a more significant revision, a restatement might be the better option. It keeps everything organized and prevents confusion for your Trustee.

  Restatement is a common mechanism for new Tennessee residents to change their Trust. Instead of piecemealing together amendments on governing law, administrative powers, and distribution plans, a new document provides all changes in one place while retaining the original identity of the Trust created in their prior state of residence.

  Keep in mind that there may be other steps needed, as well. Banks that have your Trust bank accounts may want to know that you updated the Trust. They may ask for a copy of the updated Trust agreement, or a copy of a Certification of Trust.

  Successor Trustees also need to know if there are any changes. The last thing you’d want to see is the Successor Trustee administering the Trust in a way that is no longer valid. This could lead to a lawsuit by the beneficiaries, causing substantial loss of value.

  Final Comments on How to Change a Trust

  

  Knowing how to change a Trust equips you to keep your legacy plans in line as life changes. Both amendments and restatements offer different solutions depending on the scope of your changes.

  For residents of Rutherford County and the surrounding areas, Connell Law, PLLC can help guide you through the process. Whether you opt for a simple amendment or a complete restatement, having this process done right from the start minimizes risk to you and your beneficiaries.

  Reach out to us today to request a free consultation.

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• What is a Pour-Over Will and How Does it Work?

  

  In the estate planning world, you’ve likely heard of the Last Will & Testament. It’s a classic component of a comprehensive estate plan. But it isn’t always the main driver of things. Sometimes, a Living Trust may take the lead instead. In such a case, a Pour-Over Will comes into play. In this article we’ll…

  

  In the estate planning world, you’ve likely heard of the Last Will & Testament. It’s a classic component of a comprehensive estate plan. But it isn’t always the main driver of things. Sometimes, a Living Trust may take the lead instead. In such a case, a Pour-Over Will comes into play.

  In this article we’ll discuss what the Pour-Over Will is and how it fits into a Trust-based estate plan.

  What is a Pour-Over Will?

  The Pour-Over Will is just as much a Last Will & Testament as any other. But it’s more of a fallback document instead of the cornerstone.

  With a Will-based estate plan, the Will directs how certain types of assets are to be distributed. This generally covers things like vehicles, collectibles, firearms, and other tangible personal property. It can also direct who will receive real estate.

  With a Trust-based estate plan, the Trust is generally the main driver. The Trust is an extensive document regarding the powers that the Trustee has and how the Trustee will manage things.

  The best way to make a Trust-based plan work is to fund the Trust during life. This means retitling assets into the name of the Trust and creating a formal record of what it holds. But sometimes, certain assets may be forgotten.

  This is where the Pour-Over Will goes to work.

  How Does It Work?

  

  A Last Will & Testament often directs the Executor to distribute assets to certain people individually. A Will can also create a Testamentary Trust. But a Pour-Over Will directs the Executor to distribute assets to a Living Trust that already exists.

  Let’s look at a hypothetical situation to see this in action.

  Charlie executed a Trust-based estate plan. Based on his attorney’s advice, he executed a Pour-Over Will alongside the Trust. Charlie transferred most of his assets to the Trust, but he forgot something very important.

  At the time he died, he had a $1 million life insurance policy. But he didn’t designate a beneficiary. The death benefit was then payable to his estate instead of directly going to someone.

  Now what?

  The Pour-Over Will tells the Executor what to do. In that document, there was a provision stating the following:

  All of my residuary estate I give to the Successor Trustee of the Charlie Living Trust, a Revocable Living Trust of which I am Settlor and Trustee. I direct that my residuary estate be added to and commingled with the assets of my Living Trust and managed according to the Trust’s terms.

  This provision in the Pour-Over Will means that the $1 million goes to the Trust. The Trust’s terms direct what happens next with that money.

  The result otherwise would be that Charlie’s heirs-at-law would receive that life insurance money in shares, depending on how many survive him. The heirs-at-law are his next-of-kin as defined by Tennessee’s laws of intestate succession.

  Who Needs a Pour-Over Will?

  A Last Will & Testament should be a part of all estate plans. But for those who have a Trust-based plan, it is especially important to not forget this fallback document.

  The purpose of the Trust is to hold as many assets as possible and provide for efficient and private administration. But it only works for those assets placed into the Trust, during life or at death.

  The Pour-Over Will prevents undesired results and acts as a safety net. This way, your legacy wishes are still honored even if you forget to place certain assets into the Trust while you’re living.

  So if you have a Trust as part of your estate plan, don’t forget to have a valid Pour-Over Will, too.

  Final Thoughts on Pour-Over Wills in Estate Planning

  

  Comprehensive estate planning can feel a bit overwhelming. There are many moving parts and it can be hard to keep track of everything. This is especially so for Trust-based plans.

  Having a Pour-Over Will protects your legacy and prevents undesirable results. This document is usually just a few pages, but it is still highly important.

  Connell Law, PLLC provides residents of Rutherford County and the surrounding area with estate planning, including Pour-Over Wills for Trust-based estate plans. Reach out to us to request a consultation.

  And as always, plan today for a more peaceful tomorrow.

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• Federal Court Blocks Rule Banning Non-Competes

  

  In April, the Federal Trade Commission announced a new rule that would prohibit nearly all non-compete agreements in the United States. This rule would invalidate nearly 30 million contracts. Non-competes are a controversial topic, as many view them as an unfair business practice. Unsurprisingly, many business groups brought lawsuits against the new rule prohibiting non-competes.…

  

  In April, the Federal Trade Commission announced a new rule that would prohibit nearly all non-compete agreements in the United States. This rule would invalidate nearly 30 million contracts. Non-competes are a controversial topic, as many view them as an unfair business practice.

  Unsurprisingly, many business groups brought lawsuits against the new rule prohibiting non-competes. The litigation has already been ongoing for several months.

  On July 3, a federal court in Texas put a temporary pause on the law while the matter is more thoroughly litigated. A final ruling should come down sometime in late August.

  What is a Non-Compete?

  A non-compete agreement is a type of employment contract. It will usually state something to the effect that once the employee leaves the company, he or she cannot work in that same industry for a certain period and within a certain geographical area.

  The idea is to prevent customers from leaving the company and following the employee to another business. This is especially so if the employee decides to start his or her own business. The concerns can be particularly pressing when the employee and customer have regular close points of contact.

  The customer may view the employee as their provider for that service rather than the company. At least, so the logic goes.

  Are Non-Competes Enforceable?

  Non-competes are enforceable in Tennessee if they are reasonable. But the courts nonetheless look on non-compete agreements disfavorably. The relevant factors to determine if one is enforceable are the duration, geography, and scope.

  A non-compete provision may state that the employee cannot work in the same industry for one year after leaving the company within a 10-mile radius of the company’s headquarters. This is likely an enforceable non-compete.

  But if the company says that the employee cannot work at any competing business anywhere in Tennessee for all time, a court would likely rule this unreasonable and invalidate the provision.

  There are certain exceptions to this, though. For example, non-compete agreements are generally not allowed in the legal profession. This is because of the Sixth Amendment’s right to counsel, and the fact that non-competes against lawyers would limit one’s choice of counsel.

  Why Did the Court Block the FTC’s Rule?

  

  There is some serious doubt about whether the Federal Trade Commission, an executive branch agency, can issue a rule that invalidates nearly 30 million contracts across the country.

  A federal judge in the Northern District of Texas found that the FTC likely exceeded its authority in issuing the rule. The court placed a preliminary injunction against the rule while the court hears the matter in more detail.

  An important caveat here is that the injunction applies to the parties named in the lawsuit. The court’s decision is not a nationwide injunction against the FTC’s rule. At least, for now.

  What’s Next for Non-Competes?

  The effective date for the non-compete rule is September 4. The judge stated that a more comprehensive ruling on the agency’s action will come around August 30.

  There are multiple lawsuits against the FTC over this rule, in Texas, Pennsylvania, and elsewhere. It is fairly likely that these federal courts will find the new rule to exceed the authority that Congress granted the agency.

  If a U.S. district court issues an injunction against the rule, the FTC would likely appeal to the U.S. court of appeals. Depending on how the court of appeals rules, the case could go to the United States Supreme Court within a year or so.

  Non-compete agreements are controversial contracts. Many people do not like them, especially for workers in industries like retail and fast food.

  Some states have even banned them entirely as a policy decision because of how they restrain commerce. But those states have largely done so by legislative act or through decisions by their highest courts. An executive branch agency banning these contracts nationwide is another story.

  Connell Law, PLLC will monitor the progress of these cases and advise our clients accordingly.

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• “Can I Put a Mortgaged House into a Trust?”

  

  Trusts are common vehicles in modern estate planning. Their flexibility, especially under Tennessee law, gives a lot of options for legacy planning. A core asset that trusts hold is real estate. Whether a primary residence or a rental, a trust is a tried-and-true way to manage real property. But can you place a mortgaged house…

  

  Trusts are common vehicles in modern estate planning. Their flexibility, especially under Tennessee law, gives a lot of options for legacy planning. A core asset that trusts hold is real estate. Whether a primary residence or a rental, a trust is a tried-and-true way to manage real property. But can you place a mortgaged house into a trust without any problems?

  The short answer is yes, in most cases. We’ll discuss why in this article. We’ll also provide some important caveats and things to think about if you’re considering placing a mortgaged house into a trust.

  Why is There an Issue with Putting a Mortgaged House in a Trust?

  When you purchased your house, there were many documents that you signed at closing. (Does your hand still ache from that?). Among them were likely two specific ones for the amount borrowed—a promissory note and a deed of trust.

  The promissory note is the promise to pay back what you borrowed to buy the house. The deed of trust is the lender’s security interest in the property. It allows the lender to foreclose if you fall behind on payments.

  Included in nearly all types of loan documents is what’s referred to as a “due-on-sale” clause. This allows the lender to call the entire balance of the note due if the owner gives the property to someone else.

  That said, federal law carves out certain exceptions to this. These exceptions are what allow homeowners to place a mortgaged house into a trust.

  The Garn-St. Germain Act

  

  Congress enacted the Garn-St. Germain Act in 1982. This law allows homeowners to transfer mortgaged property into a living trust without the risk of the lender calling the loan. Specifically, the Act prohibits lenders from accelerating the loan when a borrower transfers a mortgaged house into a trust of which they are a Beneficiary.

  That is, if you are the Settlor of a living trust and are also a Beneficiary, the lender cannot demand payment of the remaining balance just because you placed the house into the trust. This federal statute provides homeowners with the flexibility to engage in estate planning without the fear of triggering adverse financial consequences.

  The Act also protects certain transfers of real estate to spouses or children, though such transfers may be inadvisable. Putting an adult child’s name on the deed to your house may seem like a good estate planning strategy, but it comes with significant pitfalls. We discuss that topic here.

  Rental Property and LLCs

  While federal law provides flexibility placing a house into a trust—whether a primary residence or rental—that does not mean the law protects against all transfers.

  For example, let’s say you have a rental house and want to place it into and LLC. Let’s also say your living trust is the LLC’s member (owner). While the trust is LLC’s owner, the LLC is still a different legal entity from you as the trust Settlor. The Garn-St. Germain Act would not apply to a transfer of that rental property into the LLC.

  How would a lender find out about this transfer? A deed is effective upon your signature. But it’s filing with the Register of Deeds that provides public notice of new ownership.

  The lender may see the title transfer to the LLC. It would then have the right to call the entire loan balance due. Not a good spot to be in.

  Not all lenders would do this. Some may just want to see the monthly payments made and not care about a different name on the deed. But it’s a risky move to take without proper planning and due diligence.

  One way to avoid a legal and financial mess is to obtain lender consent to the transfer. The process to obtain consent often involves providing information about the LLC, its structure, and how the change affects property ownership.

  While this can be a quite bureaucratic procedure, it’s a necessary step to protect against substantial complications down the line.

  Steps Needed After Placing a Mortgaged House into a Trust

  

  Even though the lender cannot demand that you pay the entire balance after placing your mortgaged house into a trust, this is not the end of the story. There is still some homework you need to do.

  It is imperative to update your homeowner’s insurance policy. For a husband and wife who own a house jointly, you typically would both be listed on the policy. But if the house goes into the trust, you two are not technically the owners anymore. The trust is now the owner of record.

  If there is a discrepancy between title and the insured parties, the insurance company could deny an otherwise legitimate claim. What is likely the best path is to call your insurance agent and add the trust as an additional insured. Each carrier will have different procedures for this. So check with your agent so that you and your home remain protected.

  It is still wise to notify the lender of the change, noting that this is your living trust. This keeps everyone’s records up to date.

  Final Thoughts on Mortgaged Property and Living Trusts

  The Garn-St. Germain Act is a great piece of legislation for homeowners and their estate plans. Whether mortgaged or not, you can place your house into a living trust without the threat of having the entire loan becoming due.

  A trust-based plan is a wise choice for many people. But it’s not right for everyone. Each household should review their situation with estate planning and financial professionals to determine what is best for them.

  Connell Law, PLLC provides residents of Rutherford County and the surrounding area with estate planning services. We frequently assist our clients with putting real estate into a living trust. To determine if this is right for you, reach out today to schedule your free consultation.

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• Who Should Be Your Successor Trustee: Individual or Corporate?

  

  Creating a trust is a common part of modern estate planning. The trust can be made during life (living trust) or at death (testamentary trust). Either way, the trust is a solid way to protect and pass on a legacy. But every trust needs to have a Successor Trustee. This is who will take over…

  

  Creating a trust is a common part of modern estate planning. The trust can be made during life (living trust) or at death (testamentary trust). Either way, the trust is a solid way to protect and pass on a legacy. But every trust needs to have a Successor Trustee. This is who will take over when the current Trustee cannot manage it anymore.

  The position of Trustee requires, as the name implies, significant trust in the person who will manage the trust’s assets. The Successor Trustee can be either a person or a corporate entity. Who the best choice is will depend on each person’s unique goals and circumstances.

  For our purposes, we will primarily focus on living trusts. But much of the content will also apply to testamentary trusts. First let’s start with a brief overview of trusts generally, and then how Successor Trustees come into play.

  Basics of a Living Trust

  A living trust is an estate planning vehicle that has two main purposes. Assets in the trust are available use during your lifetime. The trust instrument directs how to distribute them after death. The key parties involved in a living trust include:

  • Settlor: The individual who creates the trust and transfers assets into it. The Settlor can also be referred to as the Grantor or Trustor.
  • Trustee: The person or entity responsible for managing the trust’s assets according to the trust instrument’s terms. The Settlor generally serves as the initial trustee.
  • Beneficiaries: The individuals or organizations that will receive assets from the trust, either during the Settlor’s lifetime or after death.

  With a living trust, the Settlor acts as Trustee while he or she is living. He or she is also considered a Beneficiary of the trust during this time.

  The Beneficiaries are usually the Settlor’s spouse and children. But they may also be other family members, close friends, or even charitable organizations. Choosing Beneficiaries is generally not a difficult part of the process.

  But choosing who will take over the trust can be a tricky decision, depending on your unique circumstances.

  The Role of a Successor Trustee

  

  A Successor Trustee steps into the role of the Trustee when the Settlor (or other current Trustee) can no longer do so. This may be due to incapacity or death. Whoever the Successor Trustee is will handle the distribution of assets, manage any ongoing trusts, and ensure that all the Settlor’s wishes are carried out.

  The choice of a Successor Trustee can significantly impact the management of your legacy. So it’s highly important to carefully consider who should take on this responsibility.

  There are two primary options for a Successor Trustee: an individual or a corporate trustee. Each has distinct advantages that may make one more suitable than the other, depending on your specific circumstances.

  Individual Successor Trustee

  An individual Successor Trustee is often a family member or close friend. This choice can be workable in situations where there is little risk of conflict among beneficiaries and where the trust does not require long-term management.

  Some advantages of having an individual serve can be:

  • Personal Connection: An individual Successor Trustee often has a personal relationship with the Settlor and Beneficiaries. This may provide a more personalized and compassionate approach to administering the trust.

  • Lower Cost: Choosing an individual can be more cost-effective. They may not charge for their services or may seek a compensation rate that is much lower than professional trusteeship services.

  • Familiarity with the Family Dynamics: A family member or close friend may have a better understanding of the Settlor’s intentions and the Beneficiaries’ specific needs.

  These advantages can come with drawbacks, though. Individuals may lack the financial knowledge or attention to detail that a professional or corporate trustee can offer. The position can also be time-consuming with the amount of work that needs to be done managing and transferring assets.

  Depending on the person’s relationship with the Settlor, it may also be emotionally challenging to carry out the duties of Successor Trustee.

  Corporate Successor Trustee

  

  A corporate trustee is a bank, trust company, or other professional fiduciary that actively manages trusts. This option can be a good choice when the trust requires long-term management. It may also be wise when there is a significant possibility of conflict among the Beneficiaries.

  A corporate Successor Trustee offers a number of advantages:

  • Professional Expertise: Corporate trustees bring a high level of financial and legal expertise. This helps to ensure that the trust is managed effectively and in compliance with all relevant laws and regulations.

  • Impartiality: As a neutral third party, a corporate trustee can impartially administer the trust. This is often helpful in preventing or resolving conflicts among Beneficiaries.

  • Long-Term Stability: Corporate trustees provide continuity and stability. They are not subject to the same life events that might affect an individual trustee, such as death, illness, or personal troubles.

  • Comprehensive Services: Many corporate trustees offer a range of services, including investment management, tax preparation, and accounting. All of these are necessary with trusts that may last for many years.

  The primary disadvantage of a corporate trustee is the cost, as they typically charge fees for their services. The trustee fees may be a percentage of the trust’s assets or an hourly rate. Because of the amount of work the corporate trustee is doing, this will often end up being somewhere around $5,000 a year at minimum.

  That means the cost of administration has to make sense. A decent benchmark for when it does is for trusts with assets of around $1 million or more.

  Additionally, some people may feel that a corporate trustee lacks the personal touch of an individual trustee. One way to deal with this is to have a co-Trustee named who has close ties with the family and can assist the corporate Trustee in administering the Trust. A Trust Advisor or Trust Protector may also fill this role.

  Final Thoughts on Choosing Your Next Trustee

  Choosing the right Successor Trustee is a pivotal decision in the creation of a trust. A well-drafted trust instrument will clearly name the next Trustee in order to make the transition as smooth as possible.

  An individual Successor Trustee may be suitable for straightforward trusts with little risk of conflict and short-term management needs. On the other hand, a corporate Trustee is often the better choice for complex or long-term trusts. Professional expertise and impartiality are crucial for such trusts.

  Carefully consider the nature of your estate plan and the specific needs of your Beneficiaries when deciding who should serve as your Successor Trustee. Consulting with an experienced estate planning attorney can also provide valuable guidance in making this important decision.

  Connell Law, PLLC serves Rutherford County and the surrounding area with estate planning, including plans with living and testamentary trusts. Reach out to us today for a free consultation.

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• The Biggest Mistake Made with Revocable Living Trusts

  

  Revocable living trusts are a highly versatile estate planning instrument. Unlike a will, the trust can assist with managing assets both during life and after death. But the trust is only as useful as the Settlor (trust creator) makes it. Sometimes trust Settlors make a huge mistake that causes the trust to lose many of…

  

  Revocable living trusts are a highly versatile estate planning instrument. Unlike a will, the trust can assist with managing assets both during life and after death. But the trust is only as useful as the Settlor (trust creator) makes it. Sometimes trust Settlors make a huge mistake that causes the trust to lose many of its benefits.

  What’s this biggest mistake that a Settlor tends to make? Failing to fund the trust.

  Let’s discuss this topic and how to make a revocable living trust work for you and your family.

  What Does it Mean to “Fund” a Trust?

  Funding a revocable living trust simply means placing assets into it. There are several ways to do this, depending on the asset type.

  For tangible personal property, there is normally a property schedule in the trust instrument. This schedule identifies certain types of items. This will generally be categories, such as:

  • Household goods
  • Furniture
  • Books
  • Clothing
  • Hobby and sports equipment
  • Jewelry
  • Decorations
  • Electronic devices

  Property listed in a schedule generally does not have any sort of registration or certificate of ownership. Listing out such assets is sufficient to make them trust assets.

  But certain assets need additional steps taken in order for the revocable living trust to hold them. Merely listing them out in a property schedule is not sufficient to place certain types of assets into a trust. This includes:

  • Real estate
  • Securities
  • Business interests
  • Bank accounts
  • Investment accounts
  • Vehicles

  These types of assets need an express update to the form of ownership.

  For real estate, this means executing and recording a deed from the owner to the trust. For bank accounts and investment accounts, they must be converted from individual ownership to trust (if the particular financial institution allows this, as not all do). Alternatively, the Settlor may need to name the trust as the beneficiary of such accounts.

  Business interests need an update to either the operating agreement, articles of organization, or corporate records to reflect trust ownership.

  The bottom line is that the signing ceremony is not the end of the journey. There is additional work needed in order to make the trust work properly.

  Why Do People Fail to Fund Their Trusts?

  

  Properly funding a trust takes a significant amount of work. After working with an estate planning attorney to draft and execute documents, it can be quite daunting to do even more work on the plan independently.

  It is a common practice for an attorney to draft and record the deed to a client’s primary residence that places the house into the trust. The attorney may also provide certain documentation to transfer ownership of business interests into the trust.

  But certain types of asset retitling require work by the client. Attorneys generally don’t update our clients’ bank accounts, investment accounts, etc. Nor do we update beneficiaries on life insurance, retirement accounts, and other transfer-on-death assets.

  This is part of the trade-off that comes with creating a revocable living trust. The default for many assets is that they will have to go through the probate process after the owner passes away. This means the time, hassle, and expense of the court system.

  The trust avoids that. But it takes work upfront to actually accomplish the goal of making the trust function properly.

  Consequences of Failing to Properly Fund Revocable Living Trusts

  The purpose of the trust, for many people, is to bypass probate. The successor trustee will privately administer the trust according to its terms after the Settlor passes away. This makes for a quite efficient transfer and management process.

  But if the Settlor does not fund the revocable living trust, then many assets will likely end up subject to probate. This defeats the entire purpose of the trust and incurs costs that could have been avoided.

  A trust-based estate plan usually includes a pour-over will to catch assets that are not in the trust. At least with the pour-over will, the final destination ends up being the trust. The trustee then manages the assets according to the trust’s terms.

  But the pour-over will is supposed to be a backup, not the main transfer mechanism. The effect of failing to fund the trust is that the total cost of the estate plan—upfront and on the backend—may be more than doubled by also incurring greater probate expenses.

  Plus, if there are concerns about third-parties coming in and throwing a grenade into the process, this will be much more likely because of the public nature of probate.

  Final Thoughts on Funding Living Trusts

  

  While revocable living trusts are excellent estate planning tools, they’re not foolproof. Whoever creates a trust needs to understand what his or her next steps are after executing the trust instrument. This, along with whatever other documents the attorney drafted.

  Connell Law, PLLC understands that the additional work needed to fund revocable living trusts can be challenging. We provide our clients with post-execution checklists to help guide them on the exact steps needs to make their plan work.

  With this in mind, remember that having a professional guide you in creating and carrying out a plan helps things go much more smoothly than going at it alone. For assistance with your estate plan, or in carrying out a deceased loved one’s plan, contact us for a free consultation.

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