Blog

Step-Children cannot Inherit without a Will

What you don't know about estate planning will hurt your step-child.
Posted: February 8th, 2019 | Permalink

Am I responsible for my loved one's debt after they die?

Soon after the loss of a loved one, you check their mailbox one day to find letters from creditors wanting to be paid. People often assume that they have to payoff their loved one’s debt after their death, but that is usually not true. In most situations, you are not responsible for your loved one’s debt. Here are a few exceptions:

  1. If you inherit an item that has debt attached to it, if you want to keep the item, you must pay the debt. If you have inherited a car or a house that was not fully paid for, you must pay the remaining balance on that item to avoid repossession or foreclosure by the lender.
  2. If you and your loved one obtained the credit together or were both listed as borrowers, then you are fully responsible for the remaining amount owed.
  3. If you gave a personal guarantee for the credit, you are responsible for the full amount owed. However, the contract you signed may have provisions that require the creditor to attempt to collect from the estate first.  
  4. Spouses are responsible for each other’s medical debt under Tennessee’s Doctrine of Necessaries.

In most other situations, your loved one’s debt will expire one-year after their date of death. If a creditor wants to be paid, the proper process is for the creditor to file a claim seeking payment in the probate of your loved one’s estate. If a probate has not been opened by your loved one’s personal representative or next-of-kin, which is not uncommon if your loved one did not leave any assets behind, then creditors have the option to force a probate to be opened. This option, however, is very rarely exercised.

Until you discuss whether or not your loved one’s estate needs to go through probate with a lawyer, you should retain every letter you receive from creditors. If the estate ultimately goes through probate, your attorney will be required to send those creditors notice of the probate. If you discarded the letters and the attorney is not able to give notice to those creditors, it could have adverse consequences on the estate.

About the Author

Amanda Jelks is licensed to practice law in Tennessee and Georgia. Her firm, Jelks Law PLLC, focuses primarily on legal issues that affect businesses and estates. Jelks Law was selected as the 2018 Emerging Business of the Year by the Urban League of Chattanooga. Amanda has been chosen as a Rising Star by Super Laywers® for the last three years in a row. This award is given to less than 2.5% of attorneys in the mid-south who are under the age of 40 or have been practicing for less than 10 years. Schedule a time to speak with Amanda today. 

Posted: January 22nd, 2019 | Permalink

7 Things You Need To Know About Adding Someone To Your Bank Accounts

Many senior citizens have the desire to add someone to their bank account to help them with their finances should they ever be in need. There are, however, several unintended consequences associated with adding someone to your account that you should be aware of.

  1. When you add someone as a joint owner on your bank account, the money in that account becomes just as much their money as it is your money. Several times each month, after something bad has happened to someone, I hear “but I can prove that every penny put into that account came from my social security check. The person I added didn’t put any money in that account.” Unfortunately, that doesn’t matter and there are no exceptions. When you make someone a joint owner of anything, they have equal rights to that item regardless of whether or not they contributed to it.
  1. Upon your death, the joint owner on your account owns the account outright regardless of what your Last Will and Testament says. The final wishes in your Will are not applicable to bank accounts that are jointly owned, regardless of what your Will says. Upon one joint owner’s death, the other joint owner becomes the sole owner of the account.
  1. The joint owner’s creditors will be able to garnish your bank account, because your money is now also the joint owner’s money. Most of the time when people are adding someone else to their bank account, they do not conduct a credit check prior to doing so. This situation can be extremely heartbreaking. If your joint owner has delinquent child support or alimony obligations, past due taxes or other financial problems then your bank account is at risk. If your joint owner is sued, either before or after you add them to your bank account, your bank account can also be used to satisfy any judgment that is entered against the joint owner. To make matters worse, if every dollar in your account is suddenly taken to pay for joint owner’s debt, you have no recourse against the joint owner given that the money in the account equally belongs to the joint owner.
  1. The fact that your joint owner is your child does not make these unintended consequences less likely to happen. Even if your child is the most financially responsible person you have ever known, bad things can still happen to good people. Your child could be at-fault for a car accident and be sued for an amount that is over and above their insurance limits. Your child could also suddenly become ill and start accruing a massive amount of medical debt. We never know what curveballs life may throw at us. All we can do is try to lessen the consequences of those curveballs in advance.
  1. The joint owner can withdraw every penny in your account at any point, while you are living or deceased, and there is nothing you can do about it.
  1. Once you add someone to your bank account, you cannot remove them as a joint owner without their written consent. The joint owner will have to sign the removal documents at the bank before the bank will remove them from the account. So, if you now want to take someone’s name off of your account, you need to make them aware of it and make sure they go to the bank to sign the proper documents.
  1. There is a better option. If you are concerned that you will need help managing your finances or paying your bills one day, then you need a Power of Attorney not a joint owner. A Power of Attorney can do all of the things you want the joint owner to do, but the money in your account never becomes the Power of Attorney’s money. As such, you do not have to worry about any of the things mentioned here happening.

About the Author

Amanda Jelks is licensed to practice law in Tennessee and Georgia. Her firm, Jelks Law PLLC, focuses primarily on legal issues that affect businesses and estates. Jelks Law was selected as the 2018 Emerging Business of the Year by the Urban League of Chattanooga. Amanda has been chosen as a Rising Star by Super Laywers® for the last three years in a row. This award is given to less than 2.5% of attorneys in the mid-south who are under the age of 40 or have been practicing for less than 10 years. Schedule a time to speak with Amanda today. 

Posted: January 15th, 2019 | Permalink

5 Things You Need to Know About Partnership Agreements

A surprisingly large number of businesses with two or more partners do not have a partnership agreement. Often times, people are so excited about launching their business that they glaze right over this very important document or they put it to the end of their to-do list, which is forever growing. Then one day, a conflict between the partners arises out of nowhere and they desperately need to know what their rights are in that situation. The partnership agreement would have governed their rights, but without it they are often left clueless. While state law provides certain rights in partnership situations, they are few in comparison to what business partners really need.

When I have this talk with people who have business partners, almost all of them have the same response detailing why they don’t need an agreement: “we have a great relationship”, “we are on the same page about everything”, “we’re family” or “we won’t have that problem”. The problem is that every single person involved in a partnership dispute said the very same thing once upon a time. While the relationship is good between the partners, it is critical that they develop a partnership agreement addressing situations that they never hope arise.

Here’s 5 things you need to know about partnership agreements:

  1. Every partner needs their own attorney. While you can copy an agreement that your friend’s business used or try to download one from the internet, the stakes are way too high to risk the future of your business (and your livelihood) on a random document you come across. All partnership agreements are not created equal. Your business is unique, you are unique and your needs are too. With that being said, if your business partner retains an attorney to draft the agreement, you need to have a separate attorney look at it. The drafting attorney is preparing the partnership agreement to be favorable to their client. Unless you and your partner met with the attorney together and signed a joint representation agreement, you are not the drafting attorney’s client.   
  2. Outline the roles and responsibilities of each partner. It is not uncommon for one partner to provide the financial resources for the business while the other partner manages the business. If that is the case, that needs to be specified in the agreement. Partners often complain that the other partner is not holding up their end of the bargain. To make it easier and less expensive to enforce “their end of the bargain”, it needs to be in writing.
  3. Detail what happens if one partner is incapacitated or dies. Imagine this: you have a 50/50 partnership that requires all major decisions to be agreed upon by both partners. One of them has a horrible car accident and is in a coma for months. How do you lawfully make major decisions for the business when you can only provide one-half of the vote? Do you want your business partner’s power of attorney (if they have one), who probably knows nothing about your business, making that decision? Likewise, what happens if your partner dies and they have a will leaving everything to their children. That would, of course, mean that you have new business partners that you didn’t ask for. Although no one likes thinking about this particular subject, it is crucial that you plan for it in your partnership agreement.
  4. Be specific about how decisions are made. Which decisions require a majority vote and which decisions require a unanimous vote? If you have a minority ownership interest (for example, the ever popular 51/49 split), this information is extremely important for you. If you have a minority interest, you will lose every single decision you don’t agree with that requires a majority vote. So, if there are certain decisions you cannot accept essentially not having a say-so in, those decisions need to require a unanimous vote and that requirement needs to be in writing.
  5. Make a plan for how partners leave the business. Partnerships do not last forever. People move on to new opportunities, they decide they no longer want to work together, or they simply retire. Your partnership agreement needs to have an exit strategy. More specifically, your agreement needs to state how the departing partner’s financial interest in the business is calculated and, once calculated, how is that interest paid (lump sum or payment plan). If your partner does something to harm the business (e.g., appears on the front page of the local newspaper for the most awful thing imaginable), can you terminate their ownership interest? When partners leave the business, can they immediately start a new business that directly competes with the prior business? If you do not address these issues, and more, in your agreement, it may come back to bite you.

About the Author

Amanda Jelks is licensed to practice law in Tennessee and Georgia. Her firm, Jelks Law PLLC, focuses primarily on legal issues that affect businesses and estates. Jelks Law was selected as the 2018 Emerging Business of the Year by the Urban League of Chattanooga. Amanda has been chosen as a Rising Star by Super Laywers® for the last three years in a row. This award is given to less than 2.5% of attorneys in the mid-south who are under the age of 40 or have been practicing for less than 10 years. Schedule a time to speak with Amanda today. 

 

Posted: January 5th, 2019 | Permalink

Powers of Attorney: An Inexpensive Solution for Unpredictable Situations

Every single adult needs a Power of Attorney to make sure they are properly cared for in the event of an unfortunate situation.
Posted: December 20th, 2018 | Permalink