When Bequeathing Usufruct, Consider Leaving Naked Ownership in Trust

Across America, people typically leave their estates to their survivors through a living trust (with the goal to avoid probate) or a last will and testament. 

When a married person leaves their estate through their last will and testament, they often either leave their surviving spouse the ownership of their estate or they leave their spouse the usufruct of their estate. One of the concerns about leaving ownership of their estate to their spouse is that, potentially, the surviving spouse could ultimately leave the entire marital estate to someone other than the children (such as, a 2nd spouse).

In Louisiana, some married people write a will and leave the usufruct of their estate to their spouse, in order to protect the children's future inheritance. They leave their spouse the usufruct (often for the lifetime of the surviving spouse), and they name their children as the naked owners. However, this can cause complications under a couple of different scenarios.

When a married person dies after having written a will leaving his spouse usufruct and naming others as naked owners, then a Succession will be necessary after the first spouse dies. All of the naked owners, along with the surviving spouse, are participants (also known as "Petitioners") in the Succession, and all must agree on how Succession matters are being handled and accounted for. Successions can be complicated and, typically, the more participants involved, the more misunderstanding that occurs. In addition, with multiple parties to a Succession, especially a number of naked owners who are concerned about protecting their future inheritance, things can get tense. Sometimes relationships among siblings and their spouses can be imperfect so when they all must participate and agree on all matters related to the Succession, it can get tricky.

So let's say go ahead and assume that the Succession gets completed and, subsequently, the surviving wife wants to sell the home. Because there are naked owners, they all must participate in the listing and selling of the home. The naked owners, in addition to the surviving spouse, must sign all of the real estate closing paperwork, often even if the first spouse to die granted his wife, as usufructuary, the authority to dispose of nonconsumable things. When a surviving spouse sells the home or other property over which there are naked owners, those naked owners often have a false expectation that they are to receive some of the proceeds of the sale of the home or other property. And sibling relationships can make it difficult for everyone to agree on all aspect of the sale of property subject to usufruct.

So when a married person writes a will and leaves their spouse usufruct of their estate, they should consider leaving the naked ownership in a testamentary trust for the benefit of the naked owners, with the surviving spouse as the trustee of that testamentary trust.

It will be easier to complete the Succession after that married person dies because the surviving spouse will be the only participant in the Succession. The surviving spouse will be the only participant because she will continue to own her half of the community property, she will inherit the usufruct of the deceased spouse's half of the community property, and she will be the trustee of a trust which holds the children's naked ownership interest. Now you won't have so many personalities involved trying to settle the estate or Succession.

In addition, under this "naked ownership in trust" bequest, the surviving spouse can sell the house or other property subject to usufruct, without having to get the agreement and signatures of all of the naked owners. In essence, the surviving spouse can sign for the naked owners on the sale paperwork because she is the trustee of a trust which owns the children's naked ownership interests.

While, on its face, the Will may initially appear more confusing when you leave the naked ownership in trust with your spouse as trustee of this testamentary trust, you'll likely be doing your spouse a big favor while also protecting the interests of your children or other naked owners.

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