Apr 2017 AFR: 2.6%
Gift Annuity State Regulations

Tennessee


Intestacy


General Definition

Any part of an estate not effectively disposed of by will passes by intestate succession to heirs. Sec. 31-2-101.

Order of Distribution

The share of the surviving spouse is

  1. If there is no surviving issue of the decedent the entire estate; or
  2. If there are surviving issue of the decedent, either one-third (1/3) or a child's share of the entire intestate estate, whichever is greater. Sec. 31-2-104(a).

The part of the estate not passing to the surviving spouse, passes as follows:

  1. To the issue of the decedent; if they are all of the same degree of relation to the decedent they take equally, if of unequal degree, then those of more remote degree take by representation;
  2. If there is no surviving issue, to the decedent's parents equally;
  3. If there is no surviving issue or parent, to the siblings and their issue by representation; or
  4. If there is no surviving issue, parent, siblings or issue of a siblings but the decedent is survived by one or more grandparents or issue of grandparents, 1/2 of the estate passes to the paternal grandparents or to their issue if both are deceased; and the other 1/2 passes to the maternal relatives in the same manner. Sec. 31-2-104(b).

If there is no taker, the intestate estate escheats to the state of Tennessee. Sec. 31-2-110.

Will Qualifications


Common Law or Community Property

Tennessee is a common law property state.

Capacity

Any person of sound mind and is 18 years of age or older may make a will. Sec. 32-1-102.

Drafting:
A will, other than a holographic or nuncupative will, must be signed by the testator and at least two witnesses. Sec. 32-1-104.

A holographic will one in which the signature and all material provisions are in the handwriting. At admission to probate, the testator's handwriting must be proved by two witnesses. Sec. 32-1-105.

A nuncupative will may be made only by a person in imminent peril of death and is valid only if the testator died as a result of the impending peril. The will must be declared to be the testator's will by the testator before two disinterested witnesses, reduced top writing by a witness within one year of the declaration and submitted for probate within six months after the death of the testator. Sec. 32-1-106.

Heirs

An "heirs" is any person, including the surviving spouse, who is entitled, under intestate succession, to the property of a decedent. Sec. 31-1-105(5).

Modifications

A will or any part of a will maybe revoked by the creation of a subsequent will that revokes the prior will or part expressly or by inconsistency. A will may also be revoked by being burned, torn, cancelled, obliterated or destroyed, with the intent and purpose of revoking it. In addition, the subsequent marriage and the birth of a child of the testator revokes the previously drafted will. Sec. 32-1-201.

If after executing a will the testator is divorced or the marriage is annulled, the divorce or annulment revokes any disposition or appointment of property made by the will to the former spouse, unless the will expressly provides otherwise. Sec. 32-1-202.

Probate Process


Opening Probate

No person may administer an estate until the person has obtained letters of administration or letters testamentary. Sec. 30-1-101.

Naming of Personal Representative

The preference for rights of administration will be granted in the following order:

  1. The person named in the will
  2. the surviving spouse,
  3. the next of kin,
  4. a creditor. Sec. 30-1-106.

Submission of Will

All written wills with witnesses must be proved by at least one of the subscribing witnesses, if living. Sec. 32-2-104.

Notifications

Within thirty days after the commencement of probate proceedings, the personal representative must provide written notice of the probate to the heirs and devisees. The notice must include his/her name, address, the date of execution of the will, the name and location of the court granting probate and the date of the probate. The information must be delivered or sent by mail to each heir and devisee whose address is reasonably available. Sec. 62-3-705.

The personal representative must publish a notice to creditors once a week for three successive weeks in a newspaper of general circulation in the county announcing the appointment and the personal representative's address. The publication must notifying creditors of the estate to present their claims within eight months of the date of the first publication of the notice or be forever barred. Sec. 62-3-801.

The personal representative, within 60 days after entering administration, must notify each legatee or devisee under the will that that person is a beneficiary. The notice must be sent by first class mail or personal delivery. It must include a copy of the will to those beneficiaries sharing in the residue of the estate and by sending a copy of the paragraph or paragraphs of the will containing the bequests to those beneficiaries only receiving bequests. Sec. 30-2-301(b)(3).

Inventory

The personal representative, within 60 days after entering on the administration of an estate, must make an inventory of the estate and return it to the court. The will of the deceased may excuse the requirement for making an inventory. Sec. 30-2-301(a).

Elective Share, Exempt Property and the Homestead Exemption


The surviving spouse has a right of election to take an elective-share amount equal to the value of the decedent's net estate, determined by the length of time the surviving spouse and the decedent were married to each other, in accordance with the following schedule.

If the decedent and the surviving spouse were married to each other:

  1. less than 3 years, 10% of the net estate;
  2. 3 years but less than 6 years, 20% of the net estate;
  3. 6 years but less than 9 years, 30% of the net estate;
  4. 9 years or more, 40% of the net estate. Sec. 34-1-101.

The surviving spouse may elect to take the spouse's elective share within nine months after the date of death. Sec. 34-1-102.

The surviving spouse is entitled to receive the exempt property having a fair-market value that does not exceed $50,000. Exempt property includes tangible personal property, vehicles and crops. Sec. 30-2-101.

In addition to an elective share and exempt property, the surviving spouse is entitled to a reasonable allowance maintenance for one year after the death of the spouse, according to the surviving spouse's previous standard of living. Sec. 30-2-102.

The surviving spouse may also make application to set aside the homestead. Sec. 30-2-201.

Debts and Distributions:
All claims have priority in the following order:

  1. Costs of administration;
  2. Funeral expenses;
  3. Taxes and federal and/or state claims;
  4. All other demands that may be filed within four months after the date of notice to creditors. Sec. 30-2-317.

After the payment of all claims and expenses of administration, obligations on account of taxes, the personal representative will pay any balance to the distributees or legatees entitled to it. Sec. 30-2-701.

Estate/Inheritance Tax


The Tennessee estate tax and inheritance tax was repealed effective January 1, 2016.

Income Tax Charitable Deductions and/or Credits


Tennessee only applies a tax to dividend and interest income. Tenn. Code Ann. §67-2-102. No deductions are offered by the state of Tennessee.

Gift Annuity Requirements


Tennessee, a "registration" state as of January 1, 2009, regulates the issuance of charitable gift annuities under the recently amended Tennessee Code Annotated Sections 56-52-101 through 56-52-111 and Tennessee Charitable Gift Annuities Regulations Chapter 0780-01-70. To qualify, applying charities must be an organization described in Sec. 501(c)(3) or Sec. 170(c) and maintain a segregated reserve account/fund for Tennessee annuitants only.

Previously, a notification letter to the Tennessee Insurance Commission was sufficient. Now, however, charities must obtain a Certificate of Authority from the Tennessee Division of Commerce and Insurance in order to issue charitable gift annuities in this state and avoid classification as engaging in the business of insurance and regulation as such. Failure to comply with state law may result in suspension or revocation of the Certificate. Section 56-52-103(e) expressly provides that persons soliciting annuities on behalf of the charity are not required to obtaining a Certificate.

Application Process

To apply for a permit with the Insurance Department, the charity must submit a detailed application. The application fee is $675. The Application for Certificate of Authority, verified by two principal officers, must be accompanied by proof of the charity's tax-exempt status as a Sec. 501(c)(3) and Sec. 170(c)(2), a financial statement from the previous fiscal year, a list of officers and directors on company letterhead, a statement that the charity meets the required minimum for the segregated gift annuity fund meeting the investment requirements and a statement that the annuity agreement does not involve any commissions. The financial statement requirement may be satisfied by attestation from two principal officers or an audit by an independently qualified CPA. The gift annuity agreement or a separately signed document must contain the property value contributed, the annuity amount, manner and interval of payments, the date payments are to begin, annuitant age and the reasonable value of the annuity benefits created calculated using IRS methodology.

Disclosure Language

The sample gift annuity agreements must contain the following state-required disclosure language:

"Payments made under the charitable gift annuity are backed solely by the full faith and credit of the organization, are not insured or guaranteed by an insurance company, are not protected by any insurance guaranty association and are not backed in any way by the state of Tennessee."

Reserve Requirements

Applying charities must maintain a segregated reserve fund. The amount required to be maintained can either be a minimum (a) equal to the reserves on the outstanding annuities plus a surplus of 10% as substantiated by an actuarial opinion from a qualified actuary or (b) equal to the total amount of donations for all outstanding gift annuities. Reserve requirement (a) requires the charity to provide actuarial certifications when submitting the reserves for review. The amount of reserves required by (a) may exclude any gift annuity amounts insured or reinsured by the charity with an authorized insurer (in which case the annuity contract purchased by the charity would be considered an "annuity risk reinsured"). The valuation calculation of the reserves described in (a) shall be the standard valuation law of the charity's domestic state, using any mortality table and the maximum interest rate permitted in determining the minimum standard for the valuation of individual annuities issued during the same calendar year as the gift annuity in the charity's domestic state. The fund should be invested in accordance with prudent investor standard, as set forth in Tennessee's Uniform Prudent Investor Act.

Annual Filing Requirements

Once a Certificate of Authority is granted, Tennessee requires an annual report be filed with the Tennessee Division of Commerce and Insurance to renew the charity's Certificate of Authority. The State expressly states that it will not provide renewal notices and, if not filed, the charity must apply for a new Certificate of Authority. Reports verified by at least two principal officers are due 90 days after the charity's fiscal year end. In lieu of a verified report, charities may submit a report audited by an independently qualified CPA within 150 days after the charity's fiscal year end. The report must include a financial statement of the organization (including balance sheet, receipts and disbursements for the preceding year), any material changes to the information, the number of gift annuity agreements issued and terminated during the year, as well as the total number of gift annuity agreements as of the end of the year. The report will also include the amount of annuity payments made during the year and the amounts transferred from the separate gift annuity fund to the charity's general account that year. Charities meeting the minimum gift annuity account requirements using the reserves method (110% of the reserves) must include an actuarial opinion prepared by a qualified actuary in addition to the verified or audited report. The annual filing fee is $100 and is due by March 1, payable to the Tennessee Department of Commerce and Insurance.

A copy of the charity's annual report filed in its domicile state, or any other state the charity must file a report of substantially the same information required under the Tennessee state, may satisfy the annual report requirement with the condition that the commissioner may require additional information.

Changes in gift annuity agreements must be submitted for approval from the Commissioner within 30 days of their proposed use and, if approval is not denied within 30 days of submitting the request, the agreements will be deemed approved.

State Contact Information

Michael Landers
Company Licensing Analyst
Tennessee Department of Commerce and Insurance
Financial Affairs Section
500 James Robertson Parkway, 7th Floor
Nashville, Tennessee 37243

Phone: 615-741-7346
Email: Michael.Landers@tn.gov

State Forms

For more information on state-specific form requirements, please contact Crescendo at 800-858-9154.
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