Avoid Estate Tax

What Does "Asset Protection" REALLY Mean?

In this post we dig a little deeper about who wants to protect their assets and their estate from losing their estate to (1) nursing home expenses; (2) a lawsuit; and (3) government intervention.

People often call our office or request to discuss with me how they can "protect their assets." But different people, in different circumstances, have different ideas regarding what they want to protect their estates FROM.

One group of people asks me about how to protect their estate from long term care expenses. Perhaps they are 65 or older, and they have seen family members and friends be forced to deplete their estate, and even lose their home, sue to the costs they must pay to reside in a nursing home.

When we engage in a conversation about Long Term Care Medicaid eligibility, we have to take an in depth look at an individual's, or couple's, assets, monthly income, health, age, and the different rules that apply. Often we make some determination regarding what assets should remain in the individual or couple's name, and what assets, perhaps, should be transferred to some form of a trust. Not that the traditional "avoid probate" revocable living trust does NOT provide much in the way of protection from nursing home expenses. Also note that this form of "asset protection" is most effective when transacted at least five years before entering a nursing home.

The second theme of asset protection involves protecting assets you own in the event you get successfully sued. Sometimes people contact us and they are a nervous wreck because "something happened," (maybe the threat of a lawsuit, maybe an automobile accident where you were determined at fault, maybe someone injured on real estate you own, or maybe you have a serious illness and you are worried about the millions of dollars of potential health care expenses).

Two common obstacles I've seen to this kind of asset protection are: (1) People do not want to give up the control over what they own; or (2) people don't engage in this kind of asset protection until it is too late - whereby action could be later undone due to the rules on fraudulent conveyances and the intent to defraud creditors.

The third category of asset protection requests comes from those who, in general, want to protect their estate from "the government." When I ask follow-up questions and dig deeper, they often want to protect their estate from the various forms of taxation, and they want to keep their estate out of probate (the court system).

The solutions for these three categories of asset protection vary based on the appropriate set of laws, rules, and regulations that apply to your situation, and the solutions vary based on your particular financial and estate situation.

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


Phone: (225) 329-2450

Dave Ramsey Says OK to Give Assets Away to Avoid Tax, But Not to Protect From Nursing Home

When seniors are either uninsurable for long term care insurance, or they make a conscious decision to avoid purchasing long term care insurance, they have a decision to make regarding potential future nursing home expenses.

And America disagrees with Dave Ramsey regarding his stance on paying for nursing home costs.

First of all, I like Dave Ramsey and his message regarding getting and staying out of debt. I also like his message about living within your means and saving for a rainy day. His message is contrary to the commercial messages people see and hear daily encouraging people to borrow and spend.

Dave Ramsey despises the estate tax. I'm sure Dave encourages all taxpayers to take advantage of tax laws like the mortgage interest deduction, the business expense deduction, and the charitable deduction to keep as much of their money in their pocket and send as little to the government for redistribution. Regarding the estate tax, I'm sure Ramsey would encourage people who are subject to the estate tax to give away as much as they can to avoid the 40% tax, and keep the family wealth "in the family."

But when it comes to nursing homes, Dave's advice is different. He suggests that you never take a penny out of your name, or re-title an account or an asset. He says if you have money you should spend it all on your care. Don't dare engage in any activity, even though it is permissible, to protect your estate from long term care costs, he says.

Here's an example. Let's say Couple A and Couple B live in the same street and all four individuals are 72 years old. Each couple has $460,000 in life savings, and each couple has a home worth $160,000. Annual nursing home costs in their state are $80,000 per person per year.

Couple A listens to Dave Ramsey and they keep everything in their name. Five years later, at age 77, both husband and wife enter a nursing home. They must spend their $460,000 in life savings on their care down to less than $3,000 - it takes them three years to do this because they are spending $160,000 per year. They then qualify for Medicaid. They live one more year in the nursing and they both pass away after residing in the nursing home for four years. After the die, Medicaid pursues its Estate Recovery rights, forces the sale of the home to reimburse Medicaid for the $160,000 of expenses it incurred. The family gets ZERO.

Couple B ignores Dave's advice and takes estate planning action to protect their savings and home. Five years later, at 77, Couple B enters the nursing home and qualifies for Medicaid. Four years later, just like Couple A, Couple B passes away. The children of Couple B now share the $640,000 of assets that Couple B had worked for, paid taxes on, and saved.

Dave Ramsey implies that what Couple B did was fraud. But it's fraud when, for example, you remove all of your assets from your name one month or one year before applying for Medicaid and you lie about it. But the government says it is permissible to engage in Medicaid planning, so long as you engage in it at least five years before applying for Medicaid.

I find it odd that Dave Ramsey would encourage people to take advantage of all tax deductions available to keep assets in the family while still taking advantage of the services the government has to offer, but don't dare move a penny of your assets in order to protect it from privately paying for nursing home costs - particularly when the government says it is ok to do so, as long as you follow their rules.

Again, I like Dave Ramsey's message on being debt-free and avoiding debt, but America does not think it is fair when those who carelessly spend everything get a 100% free ride for their long term care costs, while those who scrimp and save and accumulate a few hundred thousand dollars must get wiped out if they must reside in a nursing home.

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


Phone: (225) 329-2450

What Donald Trump's Estate Legal Plan Might Look Like

Ever wondered how Donald Trump will leave his estate? In this post we will give you some insight as to what the components of Donald Trump's estate plan will look like.

While much of what is written about Donald Trump is political, this post addresses common sense estate planning legal strategies that Donald Trump (or others like him) could implement to protect the estate.

Circumstances that will impact the implementation of an estate legal program for Donald Trump include that he's wealthy, and he's been married three times with five kids from the three wives. His wife is 24 years younger than he is. His wife has tens of millions of dollars of wealth of her own. Some of his kids are adults; one is a young adult; and one is a minor. I assume his goals include keeping his estate in the family while avoiding estate tax and other government interference. He likely has a pre-nup with his current wife.

While a drop in the bucket, Donald Trump will likely take advantage of annual gifting, making gifts of $15,000 (the present annual exclusion amount) to his five children and nine grandchildren. He will likely get his wife to consent to gift-splitting which, in effect will allow him to donate $30,000 to as many people as he wants - each year. Thus, each year, he can get $420,000 out of his estate and avoiding the future 40% estate tax that would have been paid on that value when he dies.

He will also likely pay the medicaid and educational expenses for his kids and grandkids. With his young children and grandchildren in the finest private schools, this would be another strategy to keep wealth in the younger generations.

A discussion what be necessary as to "What to donate?" He could donate cash or he could donate interests in real estate. Donations of interests in his real estate entities would be difficult to value.

I'm sure Donald Trump has powers of attorney in place to allow trusted people to make decisions for him if he is incapable. He may designate different "Agents" to make business decisions versus medical related decisions.

Any discussion regarding what happens to Donald Trump's estate must include a discussion about the federal estate tax. With a $3+ billion estate, and a 40% federal estate tax, the potential estate tax bill is enormous.

Donald Trump could give the estate tax exclusion amount ($11.4 million) to his kids (either outright or in trust), but he would want the remainder of his estate to qualify for either the federal estate tax marital deduction or the federal estate tax charitable deduction.

In general, a married person can leave their estate to their spouse and avoid estate tax upon the death of the first spouse. The concept is that married couples can arrange their estate legal affairs so that the federal estate tax is due after the surviving spouse dies. And since the First Lady is 24 years younger than Donald Trump, this could defer tax for decades.

But Donald Trump is not likely to want to leave his billions outright to his wife because, if he does, she may leave it all to her one child or to her future husband (if she has one). So, Donald Trump will leave his billions to a trust for his wife and children. His wife will be entitled to the income from the "QTIP Trust" for her lifetime, and then when she dies, the trust assets will revert to Donald Trump's heirs, presumably his five children, either outright or perhaps remaining in trust for certain children.

Donald Trump may also leave assets to charity to avoid the estate tax because assets left to charity avoid estate tax. While many wealthy billionaires have pledged to leave their fortunes to charity, my guess is that Donald Trump will want to do everything he can to keep his wealth "in the family."

A discussion is also necessary whether Donald Trump would want to make these bequests through his last will and testament (which requires a court-supervised probate when he dies), or whether he would create a revocable living trust to make these bequests, side-stepping the lengthy, expensive, and public probate system.

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


Phone: (225) 329-2450

The Double Step Up In Basis: Traditional Planning Makes Kids Pay Extra Capital Gains Tax

This describes how the traditional methods of estate planning for married couples causes children or other heirs and beneficiaries to pay extra capital gains tax due to the failure to take advantage of the double step-up in basis.

In the old days (about a decade ago), the emphasis on estate planning was always avoiding estate tax. Married couples would arrange their wills and trusts so that when the first spouse died, assets were left either in usufruct or to an irrevocable trust so that the assets of the first spouse to die would not be included, for estate tax purposes, in the estate of the surviving spouse. Assets were left to trusts commonly referred to as A/B trusts, credit shelter trusts, survivor's and family trusts, QTIP trusts, or bypass trusts. The goal was to, by leaving assets to an irrevocable trust at the death of the first spouse, those assets would escape estate taxation upon the death of the surviving spouse.

However, this planning method did not have the best capital gains tax result. In community property states, all of the community property would get a step up in basis upon the first spouse's death (to the value at the date of the first spouse's death), but only the assets that the surviving spouse owned would recognize another step up in basis when the surviving spouse died. The family was forfeiting another step up in basis.

Now, for almost all families, the fact that all the assets get lumped into the estate of the surviving spouse is irrelevant for federal estate tax purposes. Each estate can exempt $11.2 (for deaths in 2018) from the estate tax. And since new portability law allows the surviving spouse to use any part of the exemption that went unused by the first spouse to die, married couples can shield $22.4 million) from the estate tax. Simply put, estate tax is not an issue for most families.

So now, married couples should consider doing the opposite. They should consider arranging their affairs to that all marital assets get included in the estate of the surviving spouse. So long as the total is less than the estate tax exemptions, there will be no estate tax but the heirs will benefit from another step-up in basis when the surviving spouse dies. Then, if the heirs sell previously appreciated assets, there will be no tax to pay.

A simple way to include assets in the estate of the surviving spouse is to leave ownership of those assets to the surviving spouse (through a Last Will), Or if a married couple has a living trust to avoid probate, they can provide that the trust does not become irrevocable upon the death of the first spouse. However, if there is a blended family situation, or the couple is worried that the survivor may attempt to leave assets to a second spouse, or if the surviving spouse may need to qualify for Medicaid upon entering a nursing home, that couple may want to reconsider whether or not to put the surviving spouse in complete control of the marital assets.

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
Phone: (225) 329-2450

2018 Gift and Estate Tax Rules, Limits, & Analysis

There's been a big change to the estate and gift tax rules for 2018. We'll focus on the Louisiana components first, and then the federal components.

The Louisiana aspects to gift and estate tax are pretty simple. Louisiana no longer has either a state gift tax, or a state estate tax. While Louisiana, at one point, assessed a state inheritance tax when Louisiana residents died, that Louisiana inheritance tax no longer exists.

From a federal standpoint, the gift tax present interest annual exclusion increased from $14,000 to $15,000 in 2018. It gets adjusted every few years for inflation, but in $1,000 increments. The confusion comes in when people make gifts that in excess of the $15,000 present interest annual exclusion. Some people mistakenly believe that if a gift is made in excess of this amount, that someone owes tax. This belief is wrong. By making a gift in excess of $15,000 to someone in 2018, the person making the gift will simply be using some of their $11.2 million estate tax exemption - which they can use either during their lifetime or at their death. So, there will be no gift tax due (unless the gifted amounts exceed $11.2 million). 

People refer to the gift in excess of $15,000 as a "taxable gift." But that is a misnomer. I believe the gift in excess of $15,000 should be referred to as a "Reportable Gift," because in almost every instance, no tax is due by anyone.

The federal exemption for 2018 skyrocketed from the 2017 amount of $5.49 million to $11.2 million. However, for your rich folk, the exemption is scheduled to revert back in 2025 to about $6 million (hard to predict because of the inflation adjustment).  

Bottom line: almost no one (except for the uber-wealthy) need to worry about paying either gift or estate tax. The public mistakenly think that taxes are due when a gift exceeds $15,000 (the present interest annual exclusion), but those thoughts are wrong. The gift in excess of $15,000 should be referred to as a "Reportable Gift" instead of a "Taxable Gift," which infers that tax is due as a result of the gift.

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
Phone: (225) 329-2450

How To Leave a Bequest To Charity

Not everyone wants to leave part of their estate to charity. But some do. And for those who do, there can be a right way and a wrong way to leave assets to charity. The following are two things to consider when leaving assets from your estate to charity.

(1) Designate the Right Organization. There a many charities out there. Some people want to leave part of their estate for cancer research, heart research, or to an organization that helps pets. But each of these causes has numerous organizations. And some of the larger organizations have local, state, and national organizations. Make sure you research your potential charitable bequest and leave it to the right organization.

(2) Restrict Your Bequest? Some people are not aware that they can restrict their charitable organization for a specific purpose. For example, a university alumni who studied engineering may want to restrict his bequest to the university to support scholarship for students pursuing an engineering degree. You do not have to leave your bequest to the general fund of the church, school, or other charitable organization. Know that you can restrict what your bequest will be used for, so long as it is in furtherance of the organization's charitable purpose.

Most serious discussions regarding leaving part of an estate to charity involves making tax-smart decisions. For example, someone with an IRA along with other assets may choose to name a charity as the beneficiary of the traditional IRA since income tax has not been paid on these funds, and if these funds are left to a charity, then no income will need to be paid on the distribution to charity. So some people leave their charitable bequests from their IRA or other pre-tax retirement account.

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.

Churches and Charities Use Estate Planning To Help More People

Next week I'll be delivering a check for more than $100,000 to a church. I just completed the probate of someone who left a percentage of the estate to the church. I know that the church is going to help many people with this bequest.

It reminds me of how, over the years, a number of churches and charities have asked me to speak to groups of members about how  the tax law is set up to give people a big tax break when they leave a portion of their estate to their church or favorite charities.

Churches and charities don't do enough of this education. I find that, when a church or charity educates its members and asks the right way, that people want to help. People would like to see their dollars help their local community more than sending those dollars off to Washington, D.C.

If you are a church or charity leader, make a commitment to education your base about the benefits of making a church or charity part of an overall estate planning program. If you exist in South Louisiana, give me a call and let's have a talk - in the right circumstances I provide that education to groups for free. But you don't have to use me - just start. You'll be helping your organization and your community.

Paul Rabalais
Phone: 866-491-3884
Email: paul@RabalaisEstatePlanning.com

Tax Consequences When Living Trust Settlor Dies

Because our government likes to tax people, there are a number of different taxes that come into play when the Settlor of a Revocable Living Trust dies. In general, the "tax at death" landscape has changed from avoiding estate tax, to avoiding capital gains tax and income tax. The following are the types of tax that might affect you if you are a Settlor, heir, beneficiary, legatee, trustee, executor, Agent, or Grantor, Trustor, or other participant in someone's transfer of wealth.

(1) Federal Estate Tax. For most people, you ain't gotta worry about it. If you have less than $11.2 million in assets when you die, you don't even have to file a federal estate tax return. Married? Exempt $22.4 million from the 40% estate tax. Yes, like everyone says, you can call me when you win the Powerball.

(2) Louisiana Inheritance Tax. It went long gone back in 2004. Doesn't exist any more.

(3) Capital Gains Tax. Definitely in play. When someone dies, assets that they own in their name, or assets in their revocable living trust, get a step-up in basis at death. This can permit the Successor Trustee or the beneficiaries to sell appreciated assets and pay little or no tax. Example: Dad bought a share of stock for $10. Before his death, the share is worth $50. If Dad sells it before he dies, he pays capital gains tax on the $40 of capital gain. But if Dad does not sell the share, and he dies, then the heirs or beneficiaries inherit the stock at the "stepped-up" $50 (fair market value on the date Dad died). Note that in community property states like Louisiana, ALL of the community property gets a step up when the first spouse dies. It makes a lot of sense, when a married person dies, to document the value of the assets so that tax can be calculated later when the asset is sold. Remember: no capital gains tax unless an asset is SOLD.

(4) Income Tax. There are all kinds of income tax ramifications to inheriting. Depends on what you inherit and many other factors. However, in general, a distribution of trust principal to a principal beneficiary after a Settlor dies is free of income tax to the recipient. However, income tax consequences exist if you are the beneficiary of a Traditional IRA, 401(k), or other pre-tax retirement account. You may also be required to pay income tax on the "gain" portion of a tax-deferred annuity when you receive it. There are also income tax consequences to inheriting appreciated savings bonds. Note that if you are the beneficiary of a Traditional IRA, and you are not the account owner's spouse, you will likely inherit it as an Inherited IRA and you cannot wait until 70.5 to start taking required distributions.

Many of the decisions you make when establishing your estate planning program, and many of the decisions your Trustee, heirs, or beneficiaries make after you death, can have a significant impact on how much tax the government takes from your estate.

Paul Rabalais
Louisiana Estate Planning Attorney
Phone: 866-491-3884

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4 Estate Planning Tips For 2018

2018 brings some changes to the estate planning horizon. The following are four tips that you can take advantage of to protect your estate in 2018.

(1) Taxes. With the new law changes, there will be less emphasis on gift and estate tax avoidance, and more emphasis on capital gains tax and income tax avoidance. Smart married planners will ensure that their estate gets the valuable "double step-up in basis" (doesn't happen automatically), while other smart planners will arrange their affairs so that they and their heirs and beneficiaries minimize the income tax burden of a transfer of retirement accounts and other valuable assets.

(2) You're Living Longer. Because you are living longer, you need to protect your estate if you get sick for a prolonged period, or, if your mind becomes demented. Arranging all of your assets so that your trusted loved ones have access when you can't, and, for some, protecting your estate from nursing home poverty, is critical. To protect your estate from when you are sick, you must take action while you are well.

(3) Simplify Your Estate Settlement. Many Louisiana families want to arrange their estate so that judicially-supervised court proceeding (some call it "Probate;" other Louisianians call it "Succession"). Whether it's utilizing a revocable living trust or other probate avoidance strategies, act in 2018 to make estate settlement simple. In addition, have conversations with participants in your estate settlement - before your estate settlement. This can go a long way toward having an amicable estate settlement.

(4) Get Started. Procrastination is a big obstacle to estate planning. Put it on your "To Do" list, and then get started so you can check it off your "To Do" list. You'll feel great knowing you have all your legal affairs in order for yourself and your family.

Happy New Year! Make 2018 your best ever.

Paul Rabalais
Law Office locations: All over south Louisiana
Toll-free phone: 866-491-3884

Is Estate Tax Owed on Living Trust Assets?

Assets that are either in your name or in your Living Trust are going to be included in your estate when you die for federal estate tax purposes. The federal government assesses about a 40% tax on the value of your assets when you die, but only if they exceed a certain amount.

Starting in 2018, as a result of our new tax law, an individual will be able to exempt $11.2 million of assets from the 40% estate tax. To take it a little further, married couples can exempt up to $22.4 million from the federal estate tax.

In fact, for most families, it is more advantageous for assets to be included in your estate for tax purposes than excluded. Assets that are in your estate, for tax purposes, get a step-up in capital gains tax basis when you die. This permits your heirs to sell assets after you die and pay no tax on the appreciation from the time of your initial purchase until the time of your death. This can save a load of tax.

In fact, since Louisiana is a community property state, we get to benefit from the special rule that says that all of the married couple's community property gets a step-up in basis at the first death, not just the deceased spouse's half. And if you set up your estate planning program the right way, the entire estate will get another step-up in basis when the surviving spouse dies. We call this the "Doube Step-Up." But it doesn't happen automatically, you have to actively work with the right estate planning attorney who can guide you through this.

It's worth mentioning at this point that the federal gift and estate tax are unified. Here's what that means. If, in 2018, you donate more than $15,000 to anyone, no one owes tax. By giving more than the annual exclusion amount ($15,000 for 2018), you simply start using up some of your $11.2 million estate tax exemption. That's right - no one owes taxes if a gift is in excess of $15,000 (unless, of course, you give away more than $11.2 million, but that would be one heckuva gift!

And note that based on the new tax law, the estate tax exemption is scheduled to revert back to $5 million (indexed for inflation), in 2026, unless, of course, Congress and the President change it again.

Year-End Gifting Decisions

Here on December 29, it happens every year. We get blitzed with year-end gifting decisions. Yesterday, a gentleman walked into my office wanting to speak with me about whether his parents should engage in year-end gifting. HIs parents have a large estate but the son said the CPA told them not to give because they would lose the step-up in basis.

I asked the son what the parents were intending to gift. He said, "Cash - my parents are going to do a transfer out of their savings account." I then asked if the parents "wanted" to gift. He said the parents were ready and willing to do it - it sounded like the parents were getting some personal satisfaction out of making the gifts.

They decided to gift. Generally, a gift of cash is better than a gift of an appreciated assets (like appreciated stock or real estate). The apppreciated assets that remain in the parents' estate will get a step-up in basis at death. But there is no loss in step up when the gift is cash.

What Estate Related Matters Need To Be Addressed When Wealthier Parent Dies?

I was working with an older, wealthier client yesterday and the husband asked if we could prepare a list of what their survivors would need to address after they pass away. 

Every circumstance is unique but in this matter, the following are a few of the things that will need to be addressed when wealthier Louisiana parents pass away.

If the husband left assets to others through his last will and testament, a Louisiana Succession will be necessary. There may also need to be an Ancillary Probate in other states if he owned real estate in a state outside of Louisiana. If he and his wife had created a Living Trust, then no Succession will be necessary if assets are titled in the name of his trust when he dies.

He will likely have left assets either in ownership, or in usufruct, or in trust, for his wife and kids. Assets will need to be retitled into the proper form (such as into a Usufruct account or in trust). 

There may be a federal estate tax return that must be filed (even if no federal estate tax is due after the first death) within 9 months from the date of death. Both the terms of his estate legal documents, and the moves his family make are likely to have income tax and capital gains tax consequences. Good help here can save a ton.

After the surviving spouse dies, it is likely that one or more of the adult children are named as executors or trustees. If the surviving spouse left assets to the kids through her last will and testament, another Succession (and Ancillary Probates in other states) must happen. If the surviving spouse had assets titled in the name of her trust, the successor trustee (typically one or more of the kids) can disburse assets from the trust to the beneficiaries immediately, skipping the court-supervised Succession.

Estate tax returns may need to be filed, and estate tax may need to be paid. The children should get good help making sure that they inherit IRAs and other assets the right way so that taxes are minimized or avoided on the distribution or subsequent sale of inherited assets.

Don't make the mistake of asking for help after you've made a mistake that you can't undo. If you need help, call our office at 866-491-3884.

Seven Common Uses For Trusts

People often mistakenly believe that trusts are for rich people. But you're about to find out that the trusts are used these days by all classes of people, and in some scenarios, trusts can benefit the middle class more than they can benefit the wealthy.

The following are seven common reasons people in Louisiana use trusts:

(1) Avoid Probate. Probably the most common reason nationwide why people use trusts. When you die with assets in your name, whether you have a last will or not, your assets are frozen. Your executor and your heirs will hire attorneys who will guide the family through the government-supervised probate (also called "Succession") process. Most people believe that this proceeding is too burdensome, costly, time-consuming, and just an overall pain in the behind. In some cases, it tears families apart. You can establish your revocable living trust and name trustees and beneficiaries of your trust, re-title assets into your trust while you are alive, so that when you die, your trustee disburses your trust assets to your beneficiaries, all outside of the government and legal system interference.

(2)  Avoid Nursing Home Poverty. The biggest threat to many people's life savings these days is not taxes or probate, but long term care expenses. With people living longer, if you own assets and need long term skilled care, you will be forced to pay for all of your own care out of your own savings until you have less than $2,000 remaining. If you work with the right people and set things up the right way, at the right time, and you get it right the first time, then you can protect your home and life savings from a forced spend-down in the event you need long term care in the future.

(3) Protect Irresponsible Heirs. Many people we work with want to leave an inheritance to their children or grandchildren, but they fear or they know that leaving a lump sum to certain individuals will enable them to squander the inheritance and spend it on the wrong things. You can establish a trust so that when you die, the inheritance for the financially immature heir can be doled out to him or her over time, or perhaps provide for a monthly stipend, or provide that someone else would have the discretion to determine when the heir is financially responsible enough to handle an inheritance. 

(4) Blended Family Situation. The biggest worry about blended families and estate planning is that when the first spouse dies, the worry is that all of the assets will go the surviving spouse. And then when the surviving spouse dies, all assets will go to the surviving spouse's children. The children of the first spouse to die won't get a penny. If you are a spouse in a blended family situation, you can establish a trust so that when you die, your assets are available for your spouse, but when your surviving spouse later dies, remaining trust assets go back to your children. This helps blended families protect assets for the right people.

(5)  Special Needs Trust. If you leave assets outright to someone who is getting government benefits, then the inheritance you leave them may get them kicked off of their benefits. By leaving the inheritance to what is commonly referred to as a "Special Needs Trust," you can arrange things in a way so that your heir continues to receive the valuable benefits, but also benefits from the inheritance that you left them the right way in a trust.

(6) Minors. Don't ever leave anything outright to a minor. When you leave life insurance or part of an estate to a minor, then that inheritance, while the child is a minor, must be directly supervised by a judge, and a judge must approve every expenditure of the inheritance on behalf of the minor, and then when the child turns 18, the remainder of the inheritance gets dumped in the child's lap. You can set up a trust so that you name a trusted friend or relative, or perhaps a company, to be the "Trustee" of a trust for the benefit of your minor child or grandchild. This will further make sure that what you leave to the minor is used for the right reasons outside of government interference, and is doled out the right way as the minor gradually turns into an adult.

(7) Avoid Taxes. Some people set up trusts to avoid taxes. The wealthy often establish trusts to move money from their "taxable estate" to an arrangement whereby assets are "out of the estate." It is important to note, however, that this estate tax affects only a small number of families. When an individual dies with an estate of less than $5.5 million, the estate is not required to file a federal estate tax return. Married couples can double the amount they can protect.

Two Biggest Louisiana Estate Planning Misconceptions

Everyday I'm faced with Louisiana residents' misconceptions about certain areas of estate planning. If I can use this post to help just a few folks eliminate these misconceptions, it will make my life and the lives of many others much better.

Misconception #1: If you have a Will, you avoid probate. Countless times over the years a spouse has passed away and the surviving spouse has sat with me at the conference room table. The surviving spouse typically says something like this, "I thought that since my spouse had a last will and testament, that the probate (or as we often call it in Louisiana, a "Succession") was avoided. I thought I could just produce the Last Will and Testament and everything would be put in my name."

Sorry folks. No can do. A Will names an executor whose job it is to guide and nurture the family and heirs through the court process, and the Will also tells a judge who to make sure the remaining assets get disbursed to after all of the delays and costs and procedures have been met. But a Will does not avoid probate.

The second biggest misconception that I face on a daily basis is that most people think that if they give more than $14,000 to their kid, then taxes are owed. Wrong again. Everytime I hear someone tell me that taxes are owed if they give more than $14k to someone , I give them this example, which they seem to understand.

I say, "Let's assume you give $114,000 to your kid. You gave $100,000 more than the allowable amount. But no one owes taxes. By making a gift of $114,000 to your kid, you just used up $100,000 of your estate tax exemption. So now, when you die, your estate can only leave $5.35 million free of estate tax, rather than $5.45 million."

To which they respond, "Oh. That's not an issue for me because I don't have an estate that exceeds $5 million."

What other estate planning misconceptions are out there?

Should I Donate Property? Or Let Children Inherit It When I Pass Away

Several people in the last few days have asked me whether they should donate a piece of property to their child, or whether they should let the child inherit the property from the parent. 

There are several factors to consider when determining whether to donate property, or to leave to a child or other heir through your Will or Trust. Here's a few of the factors:

(1) Capital Gains Tax. If you purchased a piece of property for $50,000, and it is now worth $200,000, and you donate the property during your lifetime, the donee (the person you give the property to) will receive a "carry-over" basis. When the donee sells the property, they will pay capital gains tax on what they receive in excess of $50,000. If, however, the child inherits the property from you through your Will or Trust, the inheritor will enjoy the benefits of the "stepped-up" basis. The inheritor's basis will be the value of the property on the date of death. For this reason, many elect to hold on to their appreciated property and let the child(ren) inherit it.

(2) "I Don't Want Them To Sell It. Some people own family property and they do not want it sold after it has been transferred either through gift or inheritance. Perhaps that may be a factor that would warrant you keeping the property for your lifetime, and then allowing the inheritor to own it when you die - perhaps when they are more mature and more likely to abide by your wishes to keep the property in the family.

(3) The Property Generates Income. If the property generates timber or rental or mineral income, this may be a factor as to whether your keep it or donate it. Perhaps you want to continue to receive the income because you want it or need the income, or perhaps your child who may be in a lower income tax bracket may pay less tax if they receive the income.

(4) "I Just Him To Have It." Some people simple want their child or children to own the property - now. If that is really what you want - for whatever reason - then give it to them. Just make sure it is an informed decision in light of all of the other factors that come into play.

(5) Estate and Gift Tax. Because individuals have a $5.49 million gift and estate tax exemption that they can use by making gifts during their lifetime or by leaving assets to others when they die, the estate and gift tax should not be afactor for most people who are contemplating making gifts of property. If a gift is made that is larger than the annual exclusion amount (currently $14,000), no tax is due  - the Donor simply used up some of their $5.49 million estate tax exemption.

(6) Future Medicaid Eligibility. If there is a concern that the parent may need the Louisiana Long Term Care Medicaid benefit if they go into a nursing home in the future, this may be a factor that warrants making the donation now. If the parent holds onto the property and needs nursing home care in the future, the parent would not qualify for Medicaid until after he or she sold the property and used all of the proceeds of the sale on long  term care  nursing home expenses.

As you can see, several factors go into whether you should keep property or donate it before you pass away. Make sure your decision is fully informed - a mistake could cost your family plenty. For more help, call us at 866-491-3884.