What is the Federal Estate and Gift Tax Exemption for 2014?

A lot of people ask about the possible taxation of their estate from the federal government – often referred to as the “estate tax” or “death tax”.  For the vast majority of people, this is an irrelevant issue due to recent changes in federal tax law that significantly increased the federal estate tax exemption.  However, the IRS has recently announced the new 2014 estate and gift tax exemption.  The new 2014 federal estate gift tax exemption is $5,340,000.00.  This an increase of $90,000.00 over the 2013 estate gift tax exemption of $5,250,000.00.  As a result, it is becoming very rare that an estate will reach this level in Tennessee, although it is still certainly possible with large estates.

Is a Confidential or Fiduciary Relationship Automatically Found in the Context of a “Legal Relationship” or a “Family Relationship” in Tennessee?

The Tennessee Court of Appeals decision of Tamala Teague v. Garnette Kidd, No. E2011-02363-COA-R3-CV, 2012 WL 5869637 (Tenn.Ct.App. 2012) discussed confidential relationships under Tennessee and what duties arise in such relationships.  This is important in the context of Tennessee estate law because often disputes arise about certain transactions around the time of death.  Claims of undue influence arise because of these transactions especially when one party has a power of attorney over an elderly individual. 

A confidential relationship is a relationship where confidence is placed by one in the other and the recipient of that confidence is the dominant personality, with the ability, because of that confidence, to influence and exercise dominion over the weaker or dominated party.  In general terms, it is any relationship that gives one person the ability to exercise dominion and control over another.  The burden of proof regarding a confidential relationship rests upon the party claiming the existence of such a relationship.  Confidential relationships can assume a variety of forms, and thus the courts have been hesitant to define precisely what a confidential relationship is.

Confidential relationships generally arise in two situations: (1) “legal relationships” and (2) “family and other relationships.”  In the “legal relationships” context, a confidential relationship arises when there is some legal connection between the dominant party and the weaker party, such as when a dominant party is granted a power of attorney.  Indeed, “a confidential relationship arises as a matter of law when an unrestricted power of attorney is granted to the dominant party.” Id. (emphasis added). In contrast, “[f]amily and other relationships” do not necessarily give rise to a confidential relationship per se; therefore, to establish a confidential relationship in this situation, contestants must prove the elements of “domination and control” in order to establish that the free will of the weaker party was destroyed and that the will of the dominant party was substituted. 

Teague at 8 (citations omitted). 

LEGAL RELATIONSHIP:

Under Tennessee law, when are Gifts to a Child of the Deceased Individual Considered an Advance on any Recovery of a Child's Intestate (Without a Will) Share?

Sometimes gifts to children during a decedent's life are considered an advance on an intestate (when the deceased dies without a will) share under specific circumstances.  If the gift is considered an advance, then the amount a child receives in an intestate situation is reduced by the advanced amount.  T.C.A. § 31-5-101 provides that property given during the decedent's lifetime to a child should be treated as an “advance” if one or two circumstances are present:

(a) If an individual dies intestate as to all or a portion of the individual's estate, property the decedent gave during the decedent's lifetime to a child of the decedent is treated as an advancement against the child's intestate share only if:

(1) The decedent declared in a contemporaneous writing, or the child acknowledged in writing, that the gift is an advancement; or

(2) The decedent's contemporaneous writing or the child's written acknowledgment otherwise indicates that the gift is to be taken into account in computing the division and distribution of the decedent's intestate estate.

The value of the advancement is determined under T.C.A. § 31-5-101(b) at the time the child came into possession of or enjoyment of the property or the time of the decedent's death, whichever comes first.  Based on the language of the statute, it must clearly be the intent of the parties to consider the gift as an advance in order to cause it to reduce the intestate share the child receives. 

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