Trust and Estate Counsel

Tennessee Estate Planning Law

Insight and commentary on estate planning issues impacting affluent residents of Tennessee

Establishing a Revocable Trust with a Power of Attorney

As my clients age, I am more likely to encourage them to establish a revocable trust. There are several reasons for this preference.

First, if my clients become incapacitated, it is easier for the successor trustee to manage my client’s assets in their capacity as Trustee. Experience has shown that financial institutions are more suspicious of powers of attorney than revocable trusts. Second, if my client is successful in changing the title of all of his/her assets to the Trust, probate can be avoided in Tennessee.

Third, if my client owns property in another state, probate can be avoided in the other state. Fourth, my elderly clients are less likely to acquire additional assets during their remaining lifetimes. Thus, it is more likely that they will be able to keep all of their assets titled in the name of their trust. Finally, my elderly clients have a keener appreciation of the privacy afforded by a revocable trust.

I am currently establishing revocable trusts for two of my clients who are approaching their 80th birthdays. During the last few years, the husband has become incapacitated due to Alzheimers. Fortunately, when he signed his Will in 2006, he also signed a durable general power of attorney which authorized his wife to establish a revocable trust for him. She may only exercise this power if the dispositive provisions of the revocable trust after the husband’s death are consistent with his Will. This means that she will not be able to change the manner in which his assets will be distributed.

The wife is making a change to her dispositive provisions. She is changing the bequest to her son from an outright disposition to a bequest in trust. She would like to make the same change to her husband’s revocable trust and is confident that he would approve of this change if he was able. However, she does not have this power under the power of attorney. If the husband dies first, his assets pass to two separate trusts that will benefit the wife during her lifetime and will give her a testamentary limited power of appointment over the trust assets upon her death. Therefore, if the husband dies first, the wife will be able to change the son’s bequest from her husband to a trust. She would have this power under his current Will; therefore, she is not changing anything that would otherwise happen if her husband did not change from a Will to a revocable trust.

After the wife signs the revocable trusts, she will change ownership of various assets to the trusts. This will allow probate to be avoided for both clients, will simplify the management of the assets during my clients’ remaining lifetimes, and will simplify the disposition of my clients’ assets following their deaths.

If you choose to use a Will to dispose of your estate, consider signing a power of attorney that gives your agent the ability to create a revocable trust for you after you become incapacitated.  This can make it easier to manage your assets during your remaining lifetime and simplify the dispositon of your assets following your death.