Avoid Probate

What does Avoid Probate mean?

What does avoid probate mean?

To understand what avoid probate means, you have to understand what probate is.

For prospective law firm clients who want to schedule a free 15 minute initial phone call with Paul Rabalais, go to: https://go.oncehub.com/Paul8

Some basics: Probate, in general, is the court-supervised process of transferring assets in the name of a deceased person to the heirs. In Louisiana, probate is referred to as "a Succession." But because there are different laws, rules, and regulations that apply to different types of assets you might own, I'd like to use an example.

Let's say that Alan and Alice Peterson own five assets:

(1) A bank account;

(2) An individual retirement account (IRA);

(3) A brokerage account;

(4) A vehicle; and

(5) A home.

One die, Alan dies. Alice goes to the bank where they tell her that she still has access to their bank joint bank account. Alan goes to their brokerage firm where she is told that as the designated beneficiary on Alan's IRA, she can produce a death certificate (when she gets it) and the financial institution will transfer Alan's IRA into an IRA in Alice's name. So far, Alice is on a roll.

But when Alice inquires about their joint brokerage account, the brokerage firm tells Alice that the account is frozen, and that Alice and her family must hire an attorney to get the appropriate court orders in order to gain access to the brokerage account funds.

Then Alice discovers from the Office of Motor Vehicles that she cannot sell or otherwise transact the car until she produces the appropriate court order ordering the Office of Motor Vehicles to take Alan's name off the vehicle title.

Then, when Alice starts to inquire about selling the home, she discovers that she can't sell the home until she "completes Alan's Succession," which will clear up the title to the home.

So, even if Alan had a last will and testament, it's the fact that he had assets titled in his name when he died that required his survivors to hire lawyers to complete this court-supervised procedure, even though Alan's IRA "avoided probate."

So Alice and the kids hire a lawyer, spend a few grand or more, take several months or more, to complete the court proceeding and all that goes along with settling Alan's estate.

Years later, Alice dies, also owning five assets. Even though Alice may have had a last will and testament naming an executor, and naming her children as her sole heirs. The kids must now "lawyer up" and go through the court proceeding in order to get Alice's bank funds and brokerage account, and to sell Alice's vehicle and home.

Some people want their survivors to "avoid probate," which means they want to arrange their affairs in a manner so that their survivors will have immediate access to assets, without their survivors having to have assets frozen while survivors hire lawyers and wait on the judicial system to oversee the settling of the estate.

So perhaps Alan and Alice would have, in order to avoid probate, established the "Alan and Alice Peterson Revocable Living Trust." They would have transferred their "probate assets" to their trust, such as their home and brokerage account, while they would have kept the IRA out of the trust since IRA law permits IRA owners to designate beneficiaries of their IRA accounts.

Then when Alan died, Alice, as the trustee of their trust, could sell the home and access the trust brokerage account, without having to go through probate. Things in a trust do not have to "go through probate" when you die. Only certain assets titled in your name require a probate (or in Louisiana, "a Succession") when you die.

After both Alan AND Alice die, then the Successor Trustee so designated by Alan and Alice in the trust instrument, would have immediate access to sell trust assets (like the home, if appropriate), and disburse trust assets to the principal beneficiaries of the trust, without having the traditional attorney and court involvement that is required when you die with assets in your name and a Succession is required.

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

Why the Louisiana Succession Doesn't Ever Get Done...And How to Make Sure Yours Does Get Done

Two reasons estates don't get settled are (1) the survivors are unaware of the need to complete the probate (in Louisiana we call it a "Succession"); and (2) at least one of the participants is not cooperative.

For prospective law firm clients who want to schedule a free 15 minute initial phone call with Paul Rabalais, go to: https://go.oncehub.com/Paul8

It is not uncommon for someone to pass away leaving survivors, and those survivors are unaware of the need to complete the probate of the deceased family member. For example, let's day Dad dies. Dad and Mom had purchased a home 35 years earlier. After Dad dies, Mom decides to continue living in their home. Mom has access to all of the joint bank accounts, and Mom was the designated beneficiary of Dad's IRA. She doesn't even think about seeing a lawyer to complete a Succession. Years later, Mom wants and needs to move into an assisted living facility. She decides to sell the home to help cover the expenses of moving and living in the assisted living facility. She puts the house up for sale, finds a buyer, and signs a purchase agreement. The buyer's title attorney conducts a title examination and discovers the home is still in the names of both Dad and Mom. The buyer's title attorney says, "No sale will take place until Dad's probate is complete!" So the sale is suspended, or perhaps worse, the buyer backs out of the sale.

We often see surviving family members unaware of the need to complete a Succession after their loved one dies. Perhaps the deceased owned a rental property and the family merely continued to collect rent from a tenant but never went through the Louisiana Succession to get the title transferred. Perhaps the deceased had owned a one-third undivided interest in family property, with her two siblings, and no one bothered to include that as a Succession asset after she died. Perhaps the deceased owned real estate out of state, and the Louisiana Succession does not transfer any of the real estate owned in the name of the Louisiana resident.

So there are many circumstances where surviving family members are unaware of the need to complete a Louisiana Succession after the death of a loved one. And when they finally uncover that need years later, it is more complicated because there is urgency, or perhaps an heir of the deceased passed away in the interim, making more probates necessary.

A second, and perhaps more frustrating, reason estates don't get settled, is when one or more of the participants is uncooperative. Neither the executor acting alone, or a majority of the heirs, can complete a Louisiana Succession by themselves.

In order to transfer assets of the decease to the heirs, a judge must sign a court order ordering third parties to transfer assets out of the name of the deceased, and into the names of the heirs. A judge will not sign the necessary court order until ALL OF THE PARTIES sign off on the petition requesting the judge to sign the order (this order is referred to as a "Judgment of Possession").

Sometimes a participant will refuse to sign the necessary paperwork - sometimes for valid reasons and sometimes for petty reasons. Nonetheless, one participant refusing to fully cooperation will stop an estate settlement in its tracks.

So what's the Solution? Twofold:

(1) On the planning side, particularly if you anticipate relationship issues among your heirs, establish an estate legal program to eliminate or minimize the potential for problems. Avoid probate. Put the right people in charge with the authority to get things done. Communicate your reasons exactly why you are doing what you are doing.

(2) Once a family member dies, make sure you have very quick and very open communication with all of the parties involved. This early and open communication will build trust among the parties, often eliminating discourse.

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 Trends

Over the last couple of decades, there has been a shift in the areas that consumers address when they engage an estate planning attorney to get and keep their estate legal program in order.

For prospective law firm clients who want to schedule a free 15 minute initial phone call with Paul Rabalais, go to: https://go.oncehub.com/Paul8

While these are just trends - they don't apply to every family and every set of circumstances. For example, many families don't have a federal estate tax concern, but they also don't ever want or intend to qualify for Long Term Care Medicaid. Some estate planning issues are evergreen, they will be addressed regardless of the political landscape: issues like providing for minor children, providing for disable children, and providing for adults who cannot handle a lump sum inheritance the right way.

But the following are general shifts we see:

(1) Estate tax planning vs. Medicaid Eligibility planning. Few families these days need to worry about the federal estate tax. The average middle class family these days does worry about losing their home and life savings if they get sick and need long term care.

(2) The ILIT vs. the IIOT. Gone are the days where parents created an irrevocable life insurance trust in an attempt to use life insurance proceeds to pay estate tax. Here are the days where people transfer assets to a particular type of trust that enables them to retain elements of control but not lose the assets if they get sick.

(3) The $15,000 gift tax annual exclusion. Used to be, everyone and their brother would make gifts annually of $15,000 in an attempt to reduce the assets ultimately subject to the federal estate tax. Now, those gifts are useless, particularly if they are being made with some future Medicaid eligibility goal in mind.

(4) Avoid Lumping Assets in Surviving Spouse's Estate vs. The Double Step Up. Now, we want the assets of the first spouse to die to be "lumped" into the suriviving spouse's estate, for estate tax purposes. Assets in the estate of the surviving spouse get a step-up in capital gains tax when the surviving spouse dies. This "lumping" used to be a "no-no" because it cause the surviving spouse's estate to exceed the $600,000 estate tax exemption (which is now $11.4 million).

(5) Providing for a Child Predeceasing vs. Providing for a Child Divorcing. Many people now express a very clear desire that they do not want their ex-daughter-in-law, or their ex-son-in-law, ever controlling a penny of their money.

(6) Old School Will vs. New School Trust. Lawyers were taught in law school that wills and probate are the way to go. Plus, guiding a family through the intricacies and obstacles of the court-supervised probate (we call it "Succession" in Louisiana) can be easy and highly profitable work. Now, with so much information on the internet, consumers have now wised up to the concept that an estate can be set up to eliminate the court and attorney involvement of probate.

(7) Old School Probate vs. New School Trust Administration. Old School - your assets are frozen when you die, and your survivors hire lawyers to sort through the legal maze. New School - name a trusted family member as the Successor Trustee (or Co-Trustees) of your funded trust, and keep 100% of your estate in the family.

(8) Custom Will or Trust Provisions vs. Custom Beneficiary Designations. Now, many people have the majority of their financial wealth in their Individual Retirement Account (IRA). Your will or trust has nothing to do with directing where your retirement assets go when you die. With unique family circumstances, many families overlook the need to have their estate lawyers customize not only their traditional wills and trusts, but also their beneficiary designations on retirement accounts, annuities, and life insurance.

(9) Traditional vs. Blended Family. With people living longer and getting married more, the blended family estate plan can get tricky. Protections need to be in place both for the surviving spouse AND the children or heirs of the first spouse to die.

BONUS: For estate planning professionals only: Old School - the QTIP election. New School - the Portability election. This has to do with proper estate tax reporting within nine months after the first spouse dies, EVEN IF the first spouse to die's estate does not exceed the applicable estate tax exemption amount.

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

A Louisiana Resident's Plea to Create an Estate Planning Legal Program to Leave Her Children an Inheritance, and to Make the Estate Settlement Simple for Them.

While I've met with thousands of estate planning clients over the years as I've served as the Louisiana estate planning attorney for many Louisiana residents, I've heard many unique statements from my fantastic clients who took the time and effort to attempt to protect what they worked for and pass it along to their cherished loved ones.

But I heard a statement recently from a woman, and that statement stuck out in my mind. It wasn't a statement that was unique or unusual, but for some reason, every day I think of this woman and why she said what she said.

Her statement was, "I just want to leave my children an inheritance, and I want to make it easy for them." A very simple statement but also very profound.

When I heard her make this statement, I thought to myself, "Why did she just say that? And why did she choose those words?"

Upon further discussion, we realized that she, in the past, had family members who had entered a nursing home and were forced into the "spend-down game" prior to qualifying for long term care Medicaid. The woman had a "few hundred thousand dollars" of savings and she lived alone. She felt like her kids would care for her if necessary, but like she said, "you just never know what the future holds and I want my assets protected if I have to live in one of those god-awful nursing homes."

So, the thought process behind, "I just want to leave my kids an inheritance," could be translated to, "I don't want a long term illness, or taxes for that matter, to deplete my estate so that my kids would be left with nothing when I pass on."

But, as you may recall, she made another statement. She also stated, "I want to make it easy for them." You can break this statement, technically, down into two sub-statements. First, she could have said, "If, during some point during the rest of my lifetime, I get to a condition where I can't sign my name, make rational decisions, take myself to the doctor, understand my treatment decisions, or just can't care for myself, I don't want my kids to have to sue me in an interdiction proceeding in an attempt to have me declared incapacitated, and then have a judge appoint a legal guardian (curator) for my. I want to make it easy for my daughter to do everything for me."

And then the second sub-statement could be interpreted as, "When I leave this life, I don't want all of my assets frozen in a way that my kids can't access them, forcing them to hire lawyers to go through our judicial system just to gain access to what I leave behind."

Again, such a simple statement, "I want to leave them an inheritance and make it easy." But in today's world, you have to be pro-active and take the necessary initiative to give yourself and your children a fighting chance to protect and stay in control of everything you have worked for.

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

When You Look at the Initial Legal Planning Expense AND the Estate Settlement Expense, Which Estate Planning Program is More Efficient: the Last Will Plan or the Revocable Living Trust Plan?

People often ask how much a will or a trust costs. In this post, we look at the overall financial involvement, from implementation until after death, of having a Last Will-based Legal Plan versus a Revocable Living Trust based Legal Program.

For most, there are two different ways you can leave your estate to your survivors - through your Last Will and Testament, or through your Revocable Living Trust.

It is generally less expensive to establish a Last Will based Estate Planning Program because with a Will Plan, you will leave all of your assets in your name. You won't need to re-title your home, your other property, your investments, or other assets into a trust's name. However, when you pass away, your assets will be frozen, and your executor and heirs must go through a court-supervised process to remove your name from your home, investments, and other "probate assets."

When you set up your revocable living trust, and re-title assets in your trust, you are arranging your affairs in such a way that your trust assets will not be frozen when you die. Your trustee, when you pass away, retains thet authority to access, manage, and transfer your trust assets to your trust beneficiaries in the manner you arranged in your trust instrument. In effect, your trust replaces your last will.

While there is generally more cash outlay up front for the legal services necessary to set up a trust versus a will, the overall cash outlay considering the two probates the family must go through when each spouse dies, typically far surpasses the outlay of setting up the living trust and avoiding the two probates.

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

Is Estate Planning Mainly For the Rich?

Is estate planning only for the rich? Do middle class folks really need to engage in estate protection or estate planning?

While there are dozens of reasons people engage in estate planning with estate planning lawyers, this post addresses who REALLY benefits the most from engaging the services of the right estate planning attorney. Let's look at three aspects of estate planning - taxes, probate, and long term care expenses - and see who gets whacked the most from failing to plan.

Let's say Rich and his wife have accumulated $8 million. They never engage in any estate planning because they are too busy sailing on their boat and travelling in the Caribbean. But as they age, they get sick and they spend a staggering $1 million on long term care expenses. Then, they die, and between all the probates in the various states (they own real estate in multiple states), their estate incur a total of $400,000 in probate cost. Still, their two children divide the remaining $6.6 million - each child walks away with $3.2 million - not too shabby.

Now, let's say Middle Class Max worked his tail off to pay off his $350,000 home and accumulated $700,000 in savings. They also neglect estate planning. Later in life, Max has a stroke, and Max's wife has dementia. They too spend $1,000,000 in long term care expenses. They spend their life savings of $700,000, and Medicaid pays the remaining $300,000. They are not forced to sell their home during their lifetime, but Medicaid pursues reimbursement of $300,000 from the estates through Medicaid's Estate Recovery Program. During the probates, the house is sold for $350,000, Medicaid is paid $300,000, and funeral and probate expenses wipe out the remaining $50,000. Middle Class Max's two children are left with zippo, $0, not a thing.

So you tell me, which family would have benefited more from engaging in estate planning the right way? Rich's family or Middle Class Max's family?

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

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

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Which revocable or irrevocable trusts allow you protection from the dreaded nursing home expenses?

"Do revocable or irrevocable trusts help qualify for Long Term Care Medicaid?"

That is the question we often get from clients and prospective clients who are concerned that they will lose their savings and home if they wind up in a nursing home facility.

There are many different kinds of trusts, but often people tend to break them down into two types: revocable and irrevocable.

Regarding revocable trusts, the Louisiana Medicaid Eligibility Manual could not be much clearer, "The entire corpus of a revocable trust is counted as an available resource to the individual."

Revocable trusts have never been used to protect assets from nursing home expenses. Revocable trusts are, however, used extensively for Succession / Probate avoidance purposes. And quite frankly, when the revocable living trust works like it should, it's a wonderful thing for the survivors of the person who set up the trust. When the person who set up the trust (Settlor) dies, the Successor Trustee (often a family member) can immediately disburse assets to the trust beneficiaries (often the children) without any of the attorney and court involvement, expense, and delay associated with a court-supervised probate process.

Regarding irrevocable trusts, it is important to note that not every irrevocable trust offers nursing home protection and Medicaid eligibility. An important provision in the Louisiana Medicaid Eligibility Manual provides, in pertinent part, that, "The portion of the corpus that could be paid to or for the benefit of the individual is treated as a resource available to the individual..."

There are several other factors that affect Medicaid eligibility when someone has established an irrevocable trust, but clearly of the trustee can pay corpus to or for the individual seeking Medicaid eligibility, then the trust assets will need to be spent prior to eligibility.

Some parents, in order to protect assets, establish an irrevocable trust and provide in the trust instrument that a trustee may make distributions to or for the children of the Settlor of the trust.

Here's my words of warning regarding Medicaid eligibility. Seek out good legal help in your area. Medicaid is a combined state and federal program, so you must work with someone who is well-versed in your state's eligibility provisions. Don't try this at home on your own. Get it right the first time.

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

The Amendable But Irrevocable Trust

Is it possible to amend, modify, or change the provisions of an irrevocable trust?

All trusts can be classified as either revocable or irrevocable. The #1 reason people create revocable trusts is to hold title to assets in a way that you keep total control but eliminate the attorney and court-involved probate process when you pass away. Quite a bit is written about using revocable living trusts to avoid probate, so that is not the topic of this post.

Irrevocable trusts, however, are created for many different reasons: avoid taxes, lawsuit protection, and nursing home protection, just to name a few.

The word "irrevocable" scares many consumers, but it may not need to. Someone can establish an "irrevocable" trust, yet reserve the right to modify certain terms of the trust after the trust is created.

Here's an example: Parent sets up a trust. Parent is referred to as the "Settlor." In the trust instrument, it states that "X" is the trustee of the trust. It further states that "Y" and "Z" are the principal beneficiaries of the trust. The trust states that the trustee may distribute principal to the principal beneficiaries during the lifetime of the Settlor. The trust instrument further provides that when the Settlor dies, the trustee shall terminate the trust and distribute the principal to the principal beneficiaries.

Then, the trust instrument further provides that the Settlor can replace the trustee, and the trust instrument also provides that the trustee can replace the principal beneficiaries. Now you have an irrevocable trust where the Settlor has expressly reserved the right to modify certain provisions of the trust, yet there are some provisions of the trust that the Settlor cannot, under any circumstances, modify.

Fueling this concern over the inflexibility of irrevocable trusts is the fact that back in the 1990's, most irrevocable trusts were set up to avoid the 55% estate tax on assets that exceeded $600,000 in value at death. Settlors of those irrevocable trusts almost never reserved the right to modify those trust provisions for fear that the "right to modify" would cause the trust assets to revert back to the estate of the Settlor.

But since we now have an $11.4 million estate tax exemption, and portability between spouses, married couples can exempt $22.8 million in assets from the estate tax. Moving assets out of the estate to avoid estate tax just isn't a concern any more.

Now, irrevocable trusts are established for a variety of reasons: yes, tax avoidance is one. But so is lawsuit protection, nursing home protection, and many other reasons. But you need to be very careful when you are attempting to take advantage of trusts and other legal strategies to gain these protections because the slightest alterations of wording can have adverse tax, creditor protection, and Medicaid eligibility consequences.

So, in summary, an irrevocable trust does not need to be as scary as it first sounds, due to the fact that you can reserve the right to modify certain provisions, but you will want to tread carefully.

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

If You Have a Revocable Living Trust, Then Why Do You Need a Last Will and Testament?

If you have a Revocable Living Trust, do you need a Last Will and Testament?

When someone dies with assets in their name, like real estate, or interests in a business, or investments, those assets will be frozen when they die, even if they have a Will disposing of them, and their survivors are stuck hiring lawyers and all will go through a court process commonly referred to as probate, or in Louisiana, a Succession.

Many people, in an effort to simplify their estate settlement and avoid the court process, often create a revocable living trust, and they transfer title of their assets to their trust while they are alive, so that when they pass away, the court process is avoided because assets in a trust bypass the whole “settle your estate through the court system” process. You simply designate a Successor Trustee of your trust who can immediately sell or disburse assets from your trust to your trust beneficiaries, all outside of government supervision.

Your trust replaces the Will because the trust instrument governs who gets what as it relates to trust assets.

But even if you establish your revocable living trust, you still need to have a Will just in case assets are in your name when you die. Maybe you left something out of trust. Perhaps you acquired an asset or account in your name after you established your trust, and you forgot to title it in the name of your trust.

Someone who utilizes a revocable living trust often has a last will that is often referred to as their “pour-over” Will because it pours over the assets in your name at your death to your trust. It is there only as a "catch-all" to cover assets that should have been, but were not for some reason, put in your trust before you died.

Now, your pour-over Will may never be used because everything you have either has a beneficiary designation, is titled in the name of your trust when you die, or survivors will somehow have access to the asset upon your death.

So, in summary, if you have a revocable living trust that is designed to avoid probate and provide for the distribution of your estate when you die, you’ll also have a Will, but your Will may never need to be used because the Will is there as a "catch-all" to allow for the transfer of assets that are in your name when you die and require a probate to access.

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 Reasons Louisiana Residents Take Advantage of the Legal Services of an Estate Planning Attorney

The following are five reasons that Louisiana residents (and anyone for that matter) take advantage of the services of an estate planning lawyer:

1. Protect your Children's Inheritance from Their Divorces. Yes, the moment your children inherit from you, the inheritance is separate property. But if they commingle the inheritance (accidentally or intentionally), the inheritance becomes community property. Then, when your child later divorces, your child loses half the inheritance. You can proactively take legal steps to ensure that your child's inheritance will always be your child's inheritance.

2. Avoid Probate. When you leave assets to your survivors through your Last Will and Testament, your survivors will be required to hire attorneys and go through what many perceive to be an expensive, time-consuming, and inefficient court-supervised probate/Succession procedure to gain access to your estate assets. You can proactively arrange an estate legal program to enable your loved ones to receive your estate without having to be burdened by these court procedures.

3. Protect Assets from Long Term Care Costs. If you must enter a nursing home with assets in your name, you will be forced to deplete those assets on your long term care expenses until you are left with less than $2,000 in your name. You can take actions ahead of time to protect them but stay in control of them. This is a huge problem for the middle class that most don't address until it's too late.

4. Put the Right People in Charge. Absent your direction, a judge will select someone to handle your finances, make your medical decisions, and oversee the distribution of your estate. You will want to control who makes the decisions when you are no longer able to make them for yourself.

5. Avoid Taxes. Most estates avoid the 40% estate tax, but virtually every family faces income and capital gains tax consequences when family assets are transitioned from one generation to the next. You can be proactive and minimize these tax burdens for your family.

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 Keep Your Farm or "Family Property" in the Family for Future Generations

Many parents who have both children and grandchildren want to keep some of the property that they own so that their kids and grandkids can enjoy the property for many years to come. Perhaps the parents have seen how much their kids and grandkids enjoy the property.

However, when parents pass away and their property is left to children, property rules apply that may conflict with what the parents are trying to accomplish. Customizing the right legal program can ensure that one rogue descendant, or perhaps even the spouse of one child or grandchild, will not be able to mess up or destroy the family property that you'd want them all to enjoy.

First, let's look at some of the Louisiana laws that apply when multiple owners own real estate in Louisiana. Louisiana has a rule that states that no owner can be compelled to own property with another. When children inherit their parents' land, the children are considered "owners in indivision."

Anyone who owns an undivided interest in real estate in Louisiana, regardless of how big or small their ownership interest, can sell their ownership interest, or can force a "partition" of the property. The two kinds of partition are "partition in kind" and "partition by licitation."

When a piece of property is susceptible to being divided into lots, an owner can force a partition in kind whereby each owner would wind up with their own tract. Or, particularly if property is not susceptible to division into lots, an owner in indivision can force a sale of the property and the proceeds would be distributed to the co-owners in proportion to their ownership interest in the property.

Due to these rights that co-owners have, family property often gets sold eliminating future descedants from being able to enjoy the property.

Some owners of property think that by forming a limited liability company (LLC), the owners can keep the property in the family for generations. While owners of property should consider forming an LLC, and transferring their property to it, this is more of a "protection from lawsuits" vehicle than a "keep it in the family for generations" vehicle. Placing the property in an LLC and leaving membership interests in the LLC to your descendants won't prevent an owner/member from (1) selling or disposing of their LLC interest; (2) a member's creditor seizing their interest; or (3) giving or bequeathing their LLC membership interest to a non-family member.

These conversations about keeping property in the family for generations often turn toward creating a family trust. Parents would name a trustee or co-trustees (perhaps the "responsible" descendant") who will manage the trust assets for the benefit of all of the children and grandchildren. Backup trustees would need to be provided for since this trust may be in existence for many decades. Thanks to trust law, the descendants (trust beneficiaries) would not be permitted to sell, alienate, or mortgage, their interest in the trust, and the creditors of a beneficiary could not seize their interest in the trust.

Other issues to consider before pulling the trigger on something like this include the gift and estate tax, future Medicaid qualification, leaving funds to the trust to provide for ongoing management and expenses, and perhaps having the parents transfer the property (or their LLC which owns the property) to a revocable trust now (which trust would become irrevocable when the parents die) in order to avoid having the property go through a court-supervised probate proceeding when they pass away.

Every set of family circumstances is unique. You likely only have one "shot" to get it right. And the decisions that you make (or don't make) will affect your descendants for many, many years to come.

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

Pros and Cons of Leaving Everything to Your Spouse

When married couples engage in estate planning, one of the questions they often are required to answer is, "If I die before my spouse, do I want to leave complete ownership and control of my estate to my spouse?" Or, "Do I want to leave my estate to my spouse in a way that my children (or other heirs) are protected?"

Leaving all of your assets to your spouse is pretty easy to understand - when you die, your spouse owns everything. Maybe you are thinking that it is ok to leave everything to your spouse because you are confident that when your spouse dies, your spouse will leave it all to your kids. Or maybe you like the thought of leaving your estate to your spouse because your descendants circumstances may change after you die and you want your spouse to be able to leave the estate to your descendants the right way.

However, if you leave your estate to your spouse, your spouse "could" leave your estate to people other than your children, like your spouse's next spouse!

Some people want to leave their estate to their spouse in a way that their children or heirs are protected. The two common ways to do this are (1) in trust; and (2) via the Louisiana usufruct.

Leaving your estate to your spouse may be the best overall tax outcome, but it used to be the worst. In the old days, it did not make sense to leave your estate to your spouse because when you lumped your estate on top of your spouse's estate, it caused the spouse's estate to be subject to a 50% or more federal estate tax upon the death of the surviving spouse. But now, with an $11.4 million estate tax inclusion, and with portability (making it easier for married couples to exempt $22.8 million from the estate tax), rarely are couples penalized for leaving everything to each other.

The tax benefit that often results from leaving your estate to your spouse is that your heirs will benefit from a "double step up" in basis, for capital gains tax purposes. In community property states (like Louisiana) all community property gets a new stepped-up basis when the first spouse dies. And when you leave all of your assets to your spouse, all of the assets will get another step-up in basis when your spouse later dies. This can save considerable capital gains tax when assets are later sold, particularly if there is appreciation that occurs from the date of death of the first spouse to the date of death of the surviving spouse.

In addition, if you live in Louisiana, you are prohibited from leaving your entire estate to your spouse if you have forced heirs. Forced heirs are children of your that, at the time of your death, are 23 years of age or younger, or, are of any age but incapacitated.

Leaving assets to the surviving spouse is common for traditional families - one marriage and all children are from the one marriage. And if you really want to make it as simple as possible on your spouse when you pass away, consider establishing a revocable living trust and titling the appropriate assets in your trust. Assets in your living trust don't go through the court-supervised probate/Succession procedure, so having your assets in your living trust will prevent your spouse from having to hire lawyers and go through the courts just to get ownership of your assets after you die.

Other factors that are typically discussed when married couples engage in estate planning legal services include: who makes your decisions when you are incapable; protecting assets from long term care costs; and how will assets be managed and disbursed after both spouses pass away. These are all important components of any estate planning legal program.

Note also that if you have no legal plans in place, Louisiana laws won't do your spouse any favors. These laws will favor your descendants much more than your spouse.

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

Designating a Trust for a Non-Spouse as Beneficiary of an IRA (Individual Retirement Account)

This article address the Required Minimum Distribution (“RMD”) rules when a trust for the benefit of a non-spouse is named as the beneficiary of an Individual Retirement Account (“IRA”).

To address this topic, we’ll need to first address the RMD rules for a non-spouse beneficiary, and then look at how those rules are impacted by naming a trust for a non-spouse as a beneficiary of an IRA.

Let’s take an example. Let’s say Dad owns a $500,000 IRA. He wants to name his son (“Son”) as the beneficiary, but Dad is worried that Son will blow the money after Dad dies. Nonetheless, Dad dies and Dad’s IRA gets transferred to Son’s Inherited IRA.

Some people mistakenly believe that Son can wait until Son is 70.5 years old before distributions must begin. Others mistakenly believe that Son will be penalized if he takes distributions prior to Son turning 59.5. However, the rule is that Son may take distributions based on Son’s remaining life expectancy. So, if Son is 30 when Dad dies, the IRS tables indicate that Son has a life expectancy to age 83 (53 year remaining life expectancy). Son must take a minimum of 1/53 (about 1.9%) of the IRA starting in the year after Dad dies.

However, Dad’s concern is that, due to Son’s immaturity, or perhaps due to Son’s wife’s influence over Son, Son will take a distribution of the entire amount, and spend it, perhaps without even being able to pay the tax on that significant amount – this would create a tremendous problem for Son.

So Dad looks into the possibility of naming a “Look-Through” or “See-Through” trust for Son as the beneficiary of Dad’s IRA. The trust would require that, after Dad’s death, the trustee would see to it that Son would receive his RMD, and the trustee could make additional taxable distributions to Son if the trustee determined that Son needed them for his health, education, maintenance, or support.

If Dad properly sets up the trust, Dad knows that Son will be an income until age 83, and that Son’s basic living needs will be met. Dad will also know that Son will not be able to blow the entire IRA, so Dad will protect Son from himself (and perhaps Son’s wife).

There are four requirement of a trust that must be met to get the “Look-Through” or “See-Through” treatment. But when these requirements are met, you can look through the trust and use the life expectancy of the individual trust beneficiary for RMD purposes. An ineligible trust will require taxable distributions at a much faster rate.

Note that for purposes of this article, we did not address the following circumstances: when a surviving spouse is involved, when there are multiple beneficiaries and the concept of separate accounts, and we did not address naming a charity, an estate, or an ineligible trust as a beneficiary of an IRA.

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

Should You Have a Will or Living Trust?

When people put their legal affairs in order, they have a decision to make. One of the questions they have to answer is, “ Should I use a Last Will and Testament (“Will”) as the legal instrument to pass along my estate to my heirs, or should I use a Revocable Living Trust (“Living Trust”)?

Let’s start with the basics. If you use a Will to pass your estate to your survivors, you’ll like have provisions leaving your estate, or parts of it, to your spouse, your children or others, or perhaps even leaving assets to a trust the terms of which are part of your Will (called a “testamentary trust”) that will be established with assets after your death.

With a “Will Plan,” you leave title to all your assets in your name: your home, your other real estate, your investments, and so forth. When you die, your assets are frozen (even though you had a Will), and your survivors must retain an attorney or attorneys to go through the court-supervised process of transferring assets to the people who are named in your Will.

If you have a Living Trust, your Living Trust will be prepared, for example, so that after you pass away, your trust provides that your estate, or parts of it, are to be transferred from your trust to your spouse, your children or others, or assets may remain in trust for the benefit of minors, irresponsible heirs, or heirs who are receiving government benefits so that they should not inherit assets in their name. When you establish your Living Trust, you will likely work with your estate attorney to transfer title of assets to your trust, such as your home, other real estate, investments, and so forth.

When you die, trust assets are not frozen. Attorneys and the court system do not have to get involved in the trust settlement because the court system only governs assets that are titled in your name when you die. In your Living Trust, you designated a Successor Trustee or Co-Trustees who will have immediate authority to transfer assets from your trust. Many people perceive it that their Living Trust replaces the Will.

So, which program should you have? It’s ultimately your decision, and some people make decisions like this based on their prior life experiences. Will clients often tell us something like, “When my mother died 12 years ago, I don’t remember her probate being too difficult. We had to do the probate to get the house in our names, but we were not in a big hurry.”

We hear from some Will clients the something like the following, “I don’t have any children so if my distant relatives and favorite charities named in my Will have to go through probate, so be it…I’ll be dead.”

Trust clients often tell us something like, “When my father died, his probate took years and it was difficult and expensive, and I don’t want my kids to go through that, so let’s set up a Living Trust.”

We’ll also hear, “My spouse and I want to make things as easy as we can on the surviving spouse when one of us passes, so let’s establish a Trust.”

Other Living Trust clients say, “If my spouse and I can establish a Living Trust and avoid the future delays and expenses of two probates (one when each of us dies), then a Living Trust seems like a no-brainer.”

And other Living Trust clients tell us, “We pre-arranged our funerals to make things as easy on our survivors and we’d like to do the same kind of pre-planning and pre-arrangements for our estate.”

Now, if you go the Living Trust route, make sure you watch my popular YouTube video titled, “If You Have a Revocable Living Trust, Watch This Now,” which address the important topic of trust funding.

Bottom line or Will vs. Living Trust? Take action. Talk to an estate attorney. Hopefully the attorney’s own biases don’t preclude you from making an informed decision. But get started. Failing to act puts the government in complete control of your estate, and who wants that?

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