Estate Planning for ExxonMobil Retirees

The following is an overview of estate planning for retirees from ExxonMobil Corporation.

I've been fortunate to create, maintain, and oversee the estate legal programs for hundreds of ExxonMobil retirees. In addition, I was fortunate to inherit a few shares of Exxon stock when I was eight years old - from my grandmother.

While all ExxonMobil retirees are different, the "typical" ExxonMobil retiree is in his or her 60's, has worked at ExxonMobil for decades, and has a retirement account that is his largest financial asset.

The retiree either still has an ExxonMobil Savings Plan account, or has rolled it over into an Individual Retirement Account (IRA). Some ExxonMobil retirees take advantage of the Net Unrealized Apprecation (NUA) rules and have a brokerage account where they have transferred their employer stock out of their savings plan into a brokerage account. However, only a small percentage take advantage of this. Most retirees roll over their Savings Plan into an IRA.

In addition to the retirement account, the ExxonMobil retiree has other assets, such as a home, individual or joint brokerage account, vehicles, bank accounts, perhaps other real estate, such as rental property or family property, and perhaps they have their "toys," such as campers, RVs, boats, Harleys, Some retirees have no toys because it takes them a couple of years to get through their "Honey-Do" list.

The objectives of the ExxonMobil retiree often include having an estate legal program in place to keep things simple for themselves and their survivors, provide for their family the right way, be fair to all heirs, avoid tax, keep the government out of their estate, and in some circumstances, deal with nontraditional issues like blended families, children who can't handle a lump sum of money, or special needs children who are receiving valuable government assistance.

When it comes to plan design, we must address how to handle the distribution of the retirement account. This can be anything from simple to extremely complicated, particularly when retirement account owners name trusts as beneficiaries of retirement accounts. We need to keep an eye on the required distribution rules.

For the "probate" assets, we often create a revocable living trust (RLT) to avoid Succession/Probate both when the retiree passes away, and when the spouse of the retiree passes away. Real estate, brokerage accounts, and other probate assets get transferred to the RLT, and the RLT dictates the distribution of the assets after the death of the retiree and their spouse.

We'll have discussions about how assets are left to the spouse, and how assets are left to the children. We'll also address whether a bequest will be left to grandchildren, and, if so, how the grandchildren's inheritance will be managed for them while they are young.

The plan design component of the estate plan will also include conversations about who handles the retiree's money, and who makes the retiree's health care decisions in the even the retiree can't make those decisions on his or her own. We want to ensure that the court supervised Guardianship/Interdiction/Curatorship is avoided. We'll also discuss the life-support machines decisions.

No estate planning program for an ExxonMobil retiree is complete without a thorough discussion of the estate, income, and capital gains tax consequences of leaving assets to loved ones.

The, there will be miscellaneous things that will come up and be addressed, like putting people "on" the bank account and distribution of personal effects.

Once the plan is designed, our law firm then gets to work gathering family and asset information, and then customizing the various legal instruments necessary to make sure it is all in order.

After a review of these customized legal instruments, we'll get together for the execution of them, followed by titling/funding/beneficiary designation documentation, and organizing it all for easy access by yourself and others in your estate planning portfolio binder.

If you are an ExxonMobil employee or retiree, and you want to ensure that your estate is protected for yourself and your loved ones, give our office a call (225-329-2450, or toll free at 866-491-3884) to schedule an initial conversation with me. You and your loved ones will be glad you did - you've worked to hard NOT to protect what you have.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Two Reasons to Transfer Out of State Real Estate to a Limited Liability Company

Some people own real estate in their own state, and they also own real estate in another state. There is often a right way and a wrong way to structure ownership of these properties.

The following are two reasons people transfer their out-of-state real estate to a limited liability company (LLC).

The most often cited reason to transfer real estate to an LLC is to protect yourself from potential lawsuits or other liabilities. Here's the deal: if you own real estate in your name in another state, and someone gets injured on the property, the injured party will sue the owner of the property (you). And if they are successful in their lawsuit against you, you will have to satisfy a judgment from your personal assets. So, your personal assets are at risk if you own real estate in your name.

However, if you transfer your property to your LLC, and someone gets injured, that injured party will sue the owner of the property (the LLC), and your personal assets are protected.

A second reason people transfer their out of state property to an LLC is to avoid the ancillary probate. When you die with assets in your name, your survivors will be required to go through a court proceeding ("Probate" or "Succession" - same thing really) and have the government's court system oversee the administration and disbursement of your things - some people consider this to be tedious, time-consuming, and expensive. And if you own real estate in your name in another state (outside of your home state), your survivors must hire a law firm in that other state to transfer your out of state property to your heirs. The "home-state" probate does not transfer out of state real estate that is titled in your name when you die. So, some people transfer their out of state real estate to an LLC to (1) gain limited liability; and (2) avoid the ancillary probate. The ownership of your LLC that owns out-of-state real estate can be transferred through your home-state probate.

Another alternate is to transfer your out-of-state real estate to an LLC (get limited liability and avoid ancillary probate), and then transfer your LLC to a revocable living trust so that an in-state probate is not even necessary to transfer your ownership interest in the LLC when you pass away. Don't try this at home! This is not a do-it-yourself task. If you live in Louisiana and want to get these benefits, contact my office.

There are many things to consider when taking these actions. Prior to transferring your property to an LLC, check with your lender (if you have a mortgage on the property), and check with your liability insurer (to make sure your insurance won't have to shift to a commercial policy). Make sure you get good legal help to cover all your bases and get the peace of mind you deserve.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Who Will Pay Your Long Term Care Expenses (Part 3 of 3)?

People turning 65 have a 70% chance of needing long term care services. And 20% of people turning 65 will need long term care services for more than five years.

Basic long term care services exceed $5,000 monthly. In 20 years, this cost will double. Funds come long term care services come from three sources: (1) the government; (2) insurance companies; and (3) out of people's own pockets.

In previous posts we discussed more specifically how the government pays people's long term care expenses through Medicaid (Part 1), and we discussed how insurance companies provide funds to help people cover all or a portion of these expenses (Part 2). Here we'll address what happens when people are forced to pay for the care out of their own pocketbooks.

Here are some problems that families incur when they have to spend their own hard-earned dollars paying for long term care services.

Sometimes a family will admit a spouse or parent into a nursing home, forking out $6,000 per month, while the people in the rooms to the left and the right, and the nursing home resident across the hall, are all getting what's called "a free ride." This makes people bitter about the "system."

But let's say, rather, that a family decides to skip the nursing home route and they decide to keep husband/wife/father/mother at home. Well, 24/7 care these days cost in excess of $10,000 monthly - so the funds go even faster.

So now the family decides to save money by having the children "take turns" caring for their parent. But what often happens is only two of the four children live in the same geographic area, while two others live in town. And the primary caregiving daughter who lives locally gets made at her siblings because, while she does not mind caring for her parent, she's having to carry the heave load while other siblings don't pull their weight. All this causes family relationships to tear apart - at least that's what they tell me!

So, what should you do?

(1) Plan ahead. You'll have the most options if you start having serious discussions while you are healthy. Talk to an attorney who can help you with these and other estate planning options. Talk to your family who will play a significant role in your care.

(2) Get some help. To get the best information about your best options, you'll need help from an estate attorney who understand's your state rules regarding Medicaid eligibility, and what it takes to get there. You'll need to uncover your long term care insurance options - perhaps your attorney can guide you through this as well. And you'll need to consult with your family who will be assisting you in the future.

(3) Don't be a victim of "Paralysis By Analysis." Sometimes, when there are too many options to consider, and some of those options seem complicated, people throw up their hands and take no action, putting it off for another day, which turns into another year and then another decade.

So plan ahead. Get good information. Work with good people so you can get it right the first time, and then live your life to the fullest knowing that your long term care needs will be met according to your plan.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Who Will Pay Your Long Term Care Expenses (Part 2 of 3)?

With so many people needing long term care these days, consumers are asking lots of questions about how to protect what they own if they need expensive long term care services in the future.

In Part 1 of our three part series, we addressed when and how the government covers long term care expenses. In this Part 2, we are addressing how and when insurance companies cover long term care expenses.

In general, there are two types of long term care insurance: traditional long term care insurance, and asset based long term care insurance.

Traditional long term care insurance can be looked at similar to your automobile insurance and your homeowner's insurance. You pay for it every year, and if you never file a claim, that money is kept by the insurance company. If you own traditional long term care insurance and never need long term care services, the money you paid for the traditional long term care insurance is never recovered.

In this post, however, we'll look at an asset based insurance product that combines life insurance with long term care benefits. This policy is often funded with a single payment whereby an individual or a couple repositions what is often an existing low yield asset (like funds in a savings account) into a policy and the result is a net zero cost.

Let's take a look at an example. Let's say a healthy 59 year old couple wants to protect their assets from long term care expenses. They want to ensure that if either or both of them need long term care services in the future, that they will each have $6,000 of monthly long term care benefit, and they want that benefit to last for an unlimited period of time. They also want to make certain that if they do not need long term care services in the future, that their children (their beneficiaries) will receive a tax-free death benefit from the insurance company after they both pass away.

At 59 years old (the numbers get progressively worse the older you are when you do this), they decide to reposition $114,400 with the insurance company. When either of them need long term care and cannot perform two of the six activities of daily living, the insurance company will reimburse them for $6,000 of monthly cost. However, if they never trigger the long term care benefit, the insurance company will pay their children $150,000 after both spouses pass away.

People who tend to own long term care insurance like the peace of mind they get from knowing that coverage is in place. Insureds also like the fact that if they need long term care services, they can receive those services in their home or in the facility of their choosing - they will not be bound to a Medicaid facility under Medicaid conditions. Many believe that it makes smart financial sense to own long term care insurance - particularly if they can reposition non-performing cash and know that they (or their heirs) will receive a significant return either in the form of long term care benefits or a death benefit.

People who choose not to own long term care insurance often do so because they are choosing to either rely on Medicaid or self-fund those expenses. They may something like, "Well, Momma never needed long term care. Me and my sibling took turns taking care of her and she went down fast. If Momma would have had long term care insurance, she would not have used it. So, I'm not gonna get long term care insurance."

The key here is to plan ahead. Get educated and informed. Make good informed decisions while you are relatively young and healthy. Waiting too long or waiting until the last minute significantly limits your options.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Who Will Pay Your Long Term Care Expenses (Part 1 of 3)?

It is estimated that someone turning 65 years old today has a 70% chance of needing long term care services in their remaining years. And 20% of people turning 65 will need long term care for more than five years.

Most people believe that long term care is expensive. Estimates of monthly nursing home cost are around $5,500. And in twenty years, it is estimated that monthly nursing home costs will be in excess of $10,000.

There are three payors of long term care expenses: (1) the government; (2) insurance companies; and (3) the person needing care.

This first part of a three part series focuses on when the government covers that expense. Some people mistakenly believe that Medicare covers long term care expenses. Medicare draws a line between medical care and custodial care. Medicare does not cover custodial care - things like bathing, eating, going to the bathroom, dressing, and moving around.

When the government covers one's custodial care expenses, such as, nursing home expenses, they do it through the state's Medicaid program. But you have to be deemed "poor" under Medicaid's rules to qualify for this assistance.

There are many rules and regulations regarding Medicaid qualification, but the most basic of rules state that beside your home and a vehicle, if you own more than $2,000 of other "Countable Resources," you will not be eligible for Medicaid - you must spend and deplete resources first. Typical countable resources include money in the bank, investments, retirement accounts, and real estate that is not your home property. There is also an income test that must be passed.

Some people attempt to arrange their assets in a way to qualify for Medicaid when they go into a nursing home. Some people transfer assets out of their name. But if anything of value was transferred out of one's name within the previous five years prior to a Medicaid application, the applicant will not qualify for Medicaid and they must be a private pay patient for some period of time.

Some people inquire about transferring their assets into their heirs names while they are healthy, but Seniors get queasy about this because they lose control of their money and their estate when they transfer everything they own to others. In addition, adverse capital gains tax effects often occur when you transfer appreciated assets to others while you are alive.

So others get legal help to transfer assets to particular types of trust so that they can keep some element of control over the assets after they are transferred to the "Family Trust." In addition, the "step-up in basis" may be retained which will help the children when they subsequently sell trust assets after the death of the parent(s).

So who typically engages in this Medicaid Planning? Typically it's the middle class who perhaps have seen a parent, relative, or friend lost their life savings to long term care costs. Or perhaps people who feel they have paid enough tax over their lifetime and they want to protect their remaining assets from the government and for their loved ones to inherit.

Nonetheless, the key to protecting your estate, regardless of who may incur those costs in the future, is to plan for this while you are healthy.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Five Common Estate Planning Mistakes People and Their Attorneys Make

Face it - nobody's perfect. Mistakes are made in every facet of life, including estate planning. The following are five of the most common mistakes that people make when they attempt to put their estate legal affairs in order.

(1) Not addressing long term care. If you don't address the possibility that your estate will be depleted due to nursing home or long term care costs, there may not be an estate to leave to anyone when you pass away. But sometimes this topic does not get addressed. People will go to a lawyer to "get a Will done," and nobody brings up the legal strategies that are available to protect assets from long term care costs. Some people have this addressed through long term care insurance. And others who have significant wealth can cover the cost of their care out of their pocket without depleting much of their estate, but the middle class often is forced to deplete their life savings to cover this expense, and then the state's Estate Recovery Rights force the sale of the home after death to reimburse Medicaid for it's expenses.

(2) Not Addressing Taxes. While most people do not have to worry about the federal estate tax (due to the current exemption of $11.2 million), there can be significant capital gains tax and income tax consequences that result from transitioning assets to your spouse and the next generations. How to best utilize the step up and the double step up (for married couples) should be addressed. And some people take advantage of various distribution rules by naming as beneficiaries of their traditional IRAs their spouse, children, grandchildren, or charities.

(3) Probate. I've heard many times, "I went to a lawyer to get a Will done, and nothing was said to me about avoiding probate." Many lawyers are comfortable writing wills and then cashing in on the probate/Succession when the person dies. No comprehensive estate planning legal program should be put in place without at least a discussion about whether the court-supervised, attorney involved probate can or should be avoided.

(4) Working With the Wrong Person. Some people see that financial institutions offer "Estate Planning," and then discover that some financial institutions define estate planning as selling you life insurance. You need to start with a lawyer, but not any lawyer. Many attorneys are not sophisticated in all of the nuances that are addressed in these mistakes. Or perhaps you start talking to a lawyer who "talks over your head and does not listen and does not speak in terms you can understand."

(5) Covering Reasonable Contingencies. Not every estate planning legal program can cover every possible contingency, but they should cover the basic "what ifs" like a spouse predeceasing. Many life insurance and IRA owners designate their spouse as their beneficiary, but they neglect to designate contingent or secondary beneficiaries. Then, your survivors are bound by the terms of the life insurance contract or the IRA agreement, and there may be unintended consequences. Providing for a spouse predeceasing should be addressed. Many estate legal programs also address a child predeceasing or a child getting divorced before or after he or she receives an inheritance.

You don't know what you don't know. So hopefully this article lets you know that certain areas may need to be addressed as part of putting your estate legal program in order, even if you did not think of these things initially.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Medicaid Eligibility: What If You Transfer Assets, And Then Transfer Additional Assets Later?

We get asked the following question often: "What if I make a transfer out of my name to other individuals, or to a trust, and then I transfer additional assets out of my name at a later date? Which of these assets will be protected? How will this affect my long term care Medicaid application or eligibility?

One of the biggest threats to a person's estate is that they will be forced to deplete their estate while they are alive due to long term care expenses, and then the state will exercise it's estate recovery rights when they die so that the children or other heirs will not be able to inherit the family home.

Many people transfer assets to individuals or certain kinds of trusts while they are alive in an attempt to "protect" those assets from nursing home expenses. However, the complicated Medicaid eligibility rules make it difficult for people to take the actions they want or need to take to protect their estate.

One area that causes a great deal of confusion is when an individual makes multiple transfers at different times. Let's take an example: Let's say Joan transfers assets having a value of $400,000 on January 1, 2016. Then, on January 1, 2020, Joan transfers an additional $50,000. Then, on March 1, 2021, Joan moves into the nursing home and applies for Louisiana Long Term Care Medicaid. The following is the analysis that takes place.

An inquiry will be made to determine whether Joan had transferred any resources in the previous five years. The only resource transferred in the previous 5 years was the $50,000 transfer on 1/1/20. Since a transfer had taken place in the previous 5 years, a transfer of resources penalty period must be determined. In order to determine the penalty period, one must divide the value of the resource transferred ($50,000) by the average monthly private pay rate (determined to be $5,000), rendering Joan ineligible for Medicaid for 10 months beginning with 3/1/21 (the date of Medicaid application and otherwise eligible except for the transfer).

Many people, once they realize the application of the rules to the multiple transfers will conclude that the $400,000 is protected but the $50,000 is not.

So, what should Joan do? One option is to have the $50,000 returned to her and spend that prior to Medicaid application. The Louisiana Long Term Care Medicaid Manual provides that the uncompensated value of a transferred resource is not counted if the original resource is returned.

Or, Joan could apply for Medicaid, get denied originally, and then be eligible for Medicaid 10 months later. Or, she could go through the complicated and often mis-understood process of applying, getting denied, and then returning part of the resources to reduce the penalty period, pursuant to the rule which states that if only part of the asset or its equivalent value is returned, the penalty period is modified but not eliminated.

None of these legal strategies should be attempted by the lay person who does not have an excellent working knowledge of the Medicaid Eligibility Manual. The key in protecting your estate is to start early, work with the right people, and get it right the first time. One mistake could make things really difficult for your spouse, children, and grandchildren.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Bring This to 1st Visit With Succession Lawyer

Over the years, thousands of families have contacted us to start the discussions on settling the estate after their loved one passed away. This post describes what the family should bring to the estate lawyer's office in its first visit with the Succession attorney.

Let's provide an example. Say Mom died leaving three adult children. Mom had a last will and testament. A couple of weeks after Mom dies, one of the children realizes that accounts are frozen, they cannot sell Mom's home or other property, and they can't even sell her vehicle. So they contact an estate attorney to start the process of settling Mom's estate. What should they bring the attorney?

Every estate settlement is different, and each one requires different documentation, but you should be prepared to, at least, get the following together to bring to the lawyer who will be handling the Succession settling.

Last Will and Testament. The Will often dictates the steps that are required to complete a probate. Without knowing the terms of the Will, we cannot lay out the steps needed to complete these matters. You should bring in the ACTUAL original last will and testament, not just a copy. The actual will gets filed at the courthouse often within a a few days after the 1st meeting with the attorney.

Other relevant estate documents. Some people pass away having previously created trusts, marriage contracts, or were involved in prior probates which reflect who one owns assets. Bottom line - if a legal document looks important, bring it to the probate meeting at the estate attorney's office.

List of Assets and Debts. Many people, when they pass away, own real estate, bank accounts, brokerage accounts, and vehicles. The detailed particulars of these assets and debts need to be documented on the appropriate probate pleadings.

The People Involved. In our example where Mom died with three adult children, it's important that all three children participate in the first visit, even if it is via conference call because they are not physically or geographically able to be present in the attorney's office. When all of the relevant parties can hear the importance of following the required procedure, they will have a collective appreciation regarding what is necessary to complete all matters related to the estate - from start to finish. If one or more parties does not participate, then inevitably, that party will have questions that cannot be answered by other family members, causing more delay and frustration. Get everyone there.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Banks and Brokerage Firms: We Hardly Use Letters Testamentary These Days

After a Louisiana resident passes away, a surviving loved one often goes to the deceased's bank, credit union, or brokerage firm, in an effort to settle the estate of their loved one. The financial institution promptly responds by saying something like, "Your loved one's accounts at this financial institution are all frozen. You must bring back "Letters Testamentary" or "Letters of Administration" in order to gain access to funds.

These days, the financial institutions are asking for the wrong things. They should be requesting "Letters of Independent Executorship" or "Letters of Independent Administration."

Since 2001, Louisiana has authorized the independent administration of estates - less court supervision. Virtually all Wills written since 2001 authorize this procedure. And if a Will does not authorize it, then the heirs can agree to operate under this independent administration procedure.

After a death, when the family gets the executor confirmed, and if the executor is acting as an independent executor (which is the case in an overwhelming majority of Successions), the court does not issue "Letters Testamentary." The court issues "Letters of Independent Executorship."

So the bank requests Letters Testamentary, and then we have to tell them that we will not give them what the bank is requesting. We will give them Letters of Independent Executorship.

It would be easier on everyone if the financial institution tells the survivors of its clients and customers that they can bring in the Letters of Independent Executorship to gain access to the funds of the deceased.

To some, this may seem to be a trivial matter. But when we deal with so many confused survivors, anything the legal and financial industries can do to help those in need at a difficult time would make everyone's job easier. Just my two cents.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Do Usufruct Account Investments Get Taxed When Naked Owners Receive Them?

I'm occasionally asked whether heirs or naked owners are subject to tax when they receive the proceeds or investments from a usufruct account.

To explain this easily, let use an example: Husband dies while Husband and Wife own a $2 million investment account. The account is community property. Husband's Last Will leaves the lifetime usufruct of his estate to Wife. Husband's children are designated in the Last Will as the naked owners.

Husband died. Wife and naked owners get together, hire lawyers, complete the Succession, judge signs necessary court orders, financial institution's lawyers review the court orders, and the $2 million joint account gets divided into two new account: one solely in the name of Wife (her half of the community property), and another account titled, "Wife Usufruct." Years later, after interest, dividends, sales, reinvestments, market appreciation and depreciation, Wife dies and assets are distributed to the naked owners. The naked owners are wondering whether tax is due.

There really should be two questions asked: (1) Do we owe tax? and (2) Are we receiving the right assets?

Unless Husband's estate was large and exceeded the estate tax exemption when he died - requiring an estate tax marital deduction election, the usufruct assets will not be included in Wife's estate for federal estate tax purposes. So, typically no estate tax due.

Income tax not likely to be applicable under the general rule that an inheritance is free of income tax. Note that beneficiaries of traditional IRAs and certain annuity beneficiaries have income tax consequences upon distribution of those accounts, but that is beyond this scope.

The real messy one is the capital gains tax. It's messy because usufruct accounts are often not established consistently with Louisiana usufruct law.

Here'a a few rules that are helpful. Interest and dividends produced by assets subject to usufruct belong to the usufructuary. If stock in the usufruct account pays a dividend, that dividend should go into Wife's individual account. This is important because Wife's heirs may be different than Husband's naked owners. Also Wife's assets in her estate get another step-up in basis when she dies. While assets subject to usufruct typically do not.

Another important rule all usufructuaries and naked owners to know is that when investments (nonconsumables) subject to usufruct are sold, the usufruct attaches to the proceeds of the sale (money, which is a consumable), and Wife becomes the owner of the money with an obligation to pay the naked owner this amount when the usufruct terminates.

Another example: Wife, as usufructuary. sells investments in the usufruct account for $500,000. There may be capital gains tax due if these investments had appreciated since Husband died. Nonetheless, Wife reinvests these proceeds and, at her death, they are valued at $800,000. Result: Wife's heirs benefit from this appreciation. Wife's heirs enjoy the benefit of another step-up in basis when Wife dies, and Wife's estate owes Husband's naked owners $500,000.

Bottom line: If assets subject to usufruct are sold, then when the usufruct terminates and the naked owners receive the assets and sell them, they will owe capital gains tax on the appreciation that occurred since the date of death of the person who bequeathed naked ownership to them.

There are many moving parts to usufruct and naked ownership taxation, ownership, and indebtedness that affect the rights and obligations of usufructuaries and naked owners. And since sharing an inheritance is not always the most amicable of life circumstances, it would behoove you to have an understanding of these difficult-to-understand concepts.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Estate Planning Issues That Arise When a Couple Gets Married Later in Life Bringing Children and Assets into the Marriage

It's common these days for two people to get married later in life after getting either divorced, or outliving their first spouse. It's also common for those spouses who get married later in life to have adult children, and they also often bring significant assets into the marriage. This post addresses some of the estate legal issues that are involved when spouses get married later in life.

When no advance legal planning is addressed prior to the marriage, problems often arise after the death of one of the spouses. It's common for there to be confusion regarding who owns the marital assets. Do they belong to the husband? Do they belong to the wife? Which assets are community property? Is there any community or separate debt? Are there any reimbursement issues? These problems get compounded when the people having the discussioin/argument are the surviving spouse and the children of the first spouse to die.

Basic Louisiana community property law dictates that anything acquired during the marriage through the effort or skill of either spouse is community property. Some spouses mistakenly believe that if these "earnings" remain in the name of the spouse who earned them, then those assets would remain the separate property of that spouse.

Basic Louisiana community property law also dictates that the natural and civil fruits of the separate property of a spouse are community property. Again, many spouses mistakenly preseum that if a spouse has "separate" investments, then the interest and dividends that those "separate" investments produce must be separate property - not so.

Some spouses, particularly those with income producing assets, will sign a declaration reserving the fruits of their separate property as separate property. But this cannot be done without their spouse knowing about it. A copy of the declaration must be provided to the other spouse, and the declaration must be filed in the appropriate public real estate records.

Many couples who get married later in life, each of whom has children of their own, and each of whom have significant assets they want to "protect," sign a matrimonial agreement, also known as a "pre-nup," "marriage contract," or "separate property agreement." Couples who do this typically attempt the modify the default community property rules that exist in Louisiana when a matrimonial agreement is not in place.

Many matrimonial agreements provide that each spouse will have their own separate assets and debts, and there will be no community property. This can make it easier to determine "who owns what" when one spouse dies. When done right, there are no community property issues, community debt issues, reimbursement issues, or other claims that the estate of the first spouse to die might have against the surviving spouse. These agreements are typically signed by both spouse prior to the marriage, and they must be recorded in the appropriate public real estate records.

And then the next issue that must be addressed after the above is addressed is: How to leave our respective estates to each other and our children or other heirs - the will and trust discussion.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Where to Keep Your Last Will and Testament

I'm often asked, "Where should we keep our last will and testament?"

This is an important issue because, after you pass away, your original last will needs to be filed at the courthouse to start the court-supervised probate process (often called "Succession" in Louisiana). You have several options when it comes to where you should store your last will.

Some people mistakenly believe that all Wills are stored at the courthouse. Your Will does not get filed at the courthouse until after you pass away and the Succession is underway. A probate/Succession cannot get started until after someone dies.

Some choose to keep their original last will at their residence. This keeps the will easily accessible, but many Louisianians lost all of their important legal documents in recent hurricanes and floods around south Louisiana. If you do keep your last will and testament in your home, perhaps you should keep it in a waterproof and fireproof safe, preferably one large enough or built into the structure to prevent theft.

Others decide to keep their will in their bank safe deposit box. If you do this, you must make a decision regarding whether you want to grant someone else the authority to access your box. If no one else is "on" your safe deposit box, then a court order will be necessary after you pass away to open your box and access the contents of your safe deposit box.

Some people, at their attorney's suggestion, allow their attorney to keep their last will and testament. I've never been a big fan of the attorney keeping the originals of all of the Wills that he or she prepared. Attorneys can move around often. In addition, an awkward situation arises when the survivors may not want to use the legal services of that particular attorney or law firm after the death of a loved one. Many attorneys keep the original wills of their clients because it gives them a competitive advantage when it comes to the lucrative probate work that is necessary of the death of the will-maker.

The Louisiana Legislature has authorized the Secretary of State to maintain a Will Registration Form. While you cannot enclose a copy or the actual will, you can document the intended place of our will or the name and address of someone who has information regarding where your will is located. We don't see this Louisiana Secretary of State Will Registration Form used very often.

While there may be no "perfect place" to keep your last will and testament, you should, at least, let your trusted love ones know of the existence and location of your last will and testament.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

How To Amend or Modify a Revocable Living Trust

It is common for people, as part of the estate planning process, to establish a revocable living trust to provide for the disposition of trust assets outside of probate. Occasionally, people who previously established a revocable living trust want to amend or modify or revoke their trust.

Reasons why people would amend their revocable living trust include someone wanting to change the beneficiaries of their trust; someone wanting to amend how a beneficiary receives his or her portion or share; or perhaps changing the name of the Successor Trustee who is in charge of administering the trust after the death of the Settlor (the person who established the trust).

So, how do you amend or revoke your trust? Well, you must first look to the state law of the state that governs the trust instrument. The following is an overview of the Louisiana law applicable to modifying or revoking a trust.

What you should never do is pull out a pen and pencil and start marking on your trust. None of this will be valid. Most trust amendments or revocations in Louisiana are done by authentic act. An authentic act, generally, is a writing executed before a notary public and two witnesses, and signed by the person amending their trust, the witnesses, and the notary. Most trust amendments are done this way.

The Louisiana Trust Code also provides for modifying a trust by act under private signature, and also by testament. Even though Louisiana law provides for three different ways to modify a trust, most amendments are done through an authentic act.

Bottom line - don't try to amend or revoke a will or trust without getting some legal help from an estate attorney. Different rules apply to wills and trusts, and you must work with an attorney who understands all of this and helps you get it right the first time - there is too much at stake.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Don't Handwrite Changes on Your Last Will and Testament

I've seen many people over the years want to make changes to their existing last will and testament. Without knowing any better, they pull out their existing will, grab pen or pencil, and cross through the things they want to change while writing in replacement provisions.

For example, someone may want to change their executor. They feel that the previous executor they named (let's call him "Joe") is now a bum, and they want to replace Joe with Fred.

Or, let's say a Will provides a specific bequest either to an individual or charity of $100,000. But the testator now wants to change that bequest to $5,000.

There are a couple of Louisiana laws that are in play here. First, Louisiana law provides, in pertinent part, that a revocation of a testamentary provision occurs when the testator clearly revokes the provision or legacy by a signed writing on the testament itself.

So, the Louisiana rules are somewhat relaxed to permit the revocation of a provision in a last will by a signed writing that is not dated but which clearly revokes the provision.

However, regarding a replacement provision, the formalities are more stringent. Louisiana law provides that, "Any other modification of a testament must be in one of the forms prescribed for testaments.

Example: A woman pulls out her old will naming Joe as the executor. She scratches through Joe's name, writes in Fred's name, and signs the change. The result would be that Joe is no longer the executor because she revoked the provision by a signed writing, but Fred will not be the executor, because this modification is not in one of the forms prescribed for testaments - it does not meet the formality requirements of an olographic testament because it is not dated.

Be very careful when you attempt to change your Will. Your safest bet is to work with an attorney who understands the rules as they relate to revocations and modifications of testaments.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Protect IRA From Nursing Home: Medicaid Planning

Often, when an individual enters a nursing home, a determination is made regarding whether they will be a private pay patient or a Medicaid recipient while in the nursing home. One part of the Medicaid application process revolves around the Medicaid applicants assets.

An individual often owns exempt assets and countable resources. Common exempt assets include a home and one vehicle. Countable resources include most other assets, including bank accounts, stocks and bonds, non-home real estate, and LLC interests.

The question often comes up as to whether an Individual Retirement Account (IRA) is a countable resource.

The Louisiana Medicaid Eligibility Manual provides, in pertinent part, "Count funds in an IRA as a countable resource."

When people pre-plan for a future Long Term Care Medicaid eligibility, they often transfer title to their assets to either other individuals or to certain types of trusts. While it is fairly simple to transfer title of real estate, investment accounts, and most other assets, it is not possible to transfer ownership of an IRA to others or to a trust.

Some people consider taking a large distribution from their IRA, paying the taxes, and then protecting the after tax proceeds, but this often requires the IRA owner to pay a huge income tax bill and most people don't want to do that  - I don't blame them.

We often tell people that while you are fortunate to have an IRA, you are kind of "stuck" with it for nursing home purposes.

But know that strategies exist to protect the funds in your traditional or Roth IRA, but most of those strategies require that you plan years in advance of entering a nursing home - so it's critical that you get armed with the possibilities and take sufficient action to protect those funds.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais
Louisiana Estate Planning Attorney
www.RabalaisEstatePlanning.com
Phone: (225) 329-2450