Louisiana Inheritance

If Your Estate Attorney Talks Too Much, Fails To Listen, or Speaks Over Your Head - Leave. Questions He SHOULD Be Asking

Some people get nervous before they go see an estate planning attorney for the first time. They don't know what to expect.

Selecting the right estate attorney is important in making sure that your legacy is preserved the right way.

Before we get into which questions you should expect to be asked by your estate planning attorney, let's address some characteristics of an estate attorney that should turn you away.

First, if you find that the attorney talks the entire time during your visit, then stand up an leave. Second, if your attorney speaks in terms you do not understand, get up and leave. And finally, if your attorney is not a good listener, leave.

With that being said, here are some things you should plan to discuss in your initial conversation with your estate planning attorney.

The first question I like to ask, right out of the box, goes something like, "So as we start a conversation about your estate legal program, what kinds of things do YOU want to make sure we discuss?"

Some people have specific things they want to address, such as, a blended family situation, a problem child, specific bequests they want to make, or providing for grandchildren, just to name a few. When a client has specific issues they want to address, we need to drill down on those to make sure the estate program is tailored for their specific needs.

Other people do not have a specific issue they want to address. Perhaps they don't know what to ask and they just want to make sure their estate legal affairs are in order.

In every estate planning conversation, there are discussions about particular issues that each client has, and there are questions that we ask virtually every client. Here's a few of the questions asked of just about every client (assuming a married couple but can be adapted to a single person):

(1) After you both pass, how do you want your estate disbursed?

(2) If you have to put someone in charge of the disbursement, who should it be?

(3) When one of you passes, how do you want to leave things to the surviving spouse? Remarriage is in the back of people's minds during this conversation.

(4) If you become incapacitated while you are alive, who do you want to make your medical and financial decisions?

(5) Do you want to leave bequests through your last will and testament (requires probate), or through your revocable living trust (avoids probate)?

What I have not addressed in this short post are questions related to Medicaid Planning (nursing home poverty), estate tax planning (only affects the super wealthy), charitable bequest planning, and the creation of entities for lawsuit protection purposes (particularly if you own rental property).

The discussion you have with your estate planning attorney about your legacy is an important one. Make sure you work with an attorney who doesn't merely want to hear himself/herself talk. Make sure you work with an attorney who doesn't speak in legal-ese (over your head). And make sure you work with an attorney who listens to what you say so that he or she can ask the next right question - and then listen again!

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

Louisiana Trust Code Rules Regarding Shifting a Trust Beneficiary's Interest in Principal

Many people who put their estate plan in place do not understand the rules regarding the shifting of a trust beneficiary's interest in principal.

Occasionally, people who are putting their estate legal program in order want to make a bequest, in trust, for others - often grandchildren. Since the grandchildren are often young and immature, the grandparents often want to put stipulations on the bequest.

A common request goes something like, "I want to leave $100,000 to my grandchild when I die, but I want it to be in a trust. And if my grandchild doesn't go to college, or does drugs, or goes to jail, then that money will go back to other people I designate."

Well, you can certainly leave $100,000 in trust for another, but there are restrictions on your ability to shift that trust principal to someone else. One such restriction in the Louisiana Trust Code provides that the interest of a principal beneficiary is acquired immediately upon the creation of the trust. Once the grandparent passes away, the trust for the grandchild is created and that trust is for the grandchild only while the grandchild is alive.

What you CAN control is when the grandchild gets the principal. You could give the trustee the discretion regarding distributions of principal to the grandchild. So if the grandchild goes to jail, the trustee could exercise his or her discretion and perhaps never distribute the principal to the grandchild while the grandchild is alive.

Other controls you have include certain powers to direct principal when the grandchild dies. if the grandchild dies with descendants, you can state in the trust that the principal vests in one or more of his descendants. If the grandchild dies without descendants, you can direct who the principal vests in upon the grandchild's death.

And if you do not direct where the principal vests upon the beneficiary's death, then his interest vests in his heirs or legatees, subject to the terms of the trust.

In other words, get good legal help when you are leave a bequest, either through your last will and testament or your revocable living trust, to individuals (such as grandchildren) who you are unsure how they will turn out from a maturity standpoint. Failing to comply with the rules regarding the shifting of a beneficiary's interest in principal can cause all kinds of legal problems for your descendants in the future.

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

Will Prepared Through Suze Orman Kit Invalid in Louisiana

I was contacted recently after a father passed away. The adult children were hoping to get their father's estate settled quickly and easily. They mentioned that their father had been diagnosed with pancreatic cancer, that the diagnosis allowed only a short time to live, so he did a "quickie" Suze Orman will to specify how he wanted to leave his estate.

When I heard about the Will, I told myself I needed to see it. The son told me that the Will was three pages long. I said, "Hang up. Take a picture of each page and text them to me." He did.

Whenever I review a Will for the first time, I always look for two things. First, I confirm that the Will meets the validity requirements for a last will and testament. And second, I look at the actual words and terms used in the Will for bequests, appointments, and other ancillary provisions.

In general, it's pretty easy to make a valid will. But the trickery comes in using all of the right terms in all of the right places.

In this matter though, it took me about three seconds to determine that the Will was invalid.

In Louisiana, there are two types of Wills: olographic and notarial. The olographic will is entirely handwritten. This will was typed. The notarial testament is typically typed, but must be signed "at the end of the testament and on each other separate page." Of the three pages, only one was signed.

In addition, to be a valid notarial testament, the notary and two witnesses must sign a certain declaration that is inserted at the end of the testament. In this Will, there was no notary signature, just the signatures of two witnesses.

So, in about three seconds. I discovered two reasons that this Will is invalid. And yet, there was a third problem. For a notarial testament to be valid, the notary and witnesses must sign a declaration that is worded as described in our Louisiana statute. The declaration in the Will must be at least "substantially similar" to the declaration provided in the Louisiana statute. The declaration at the end of this purported Will was not substantially similar to the declaration provided by Louisiana law.

Since the Will was invalid, it didn't make sense to even look at the terms of the purported Will, since they would have no legal effect - at all. It's unfortunate that this man's final wishes to leave his legacy a certain way would not be followed. Instead, state law will determine who inherits his estate.

The moral of this story is that you should be careful about using the "do-it-yourself" estate planning tools that are out there. Many things can and do go wrong when you attempt to take shortcuts in the estate process.

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

Disclaimer or Renunciation an Effective Post-Death Estate Planning Tool

Sometimes, believe it or not, it makes good tax or legal sense to formally refuse (also known as "disclaim" or "renounce") an inheritance.

Example: Dad dies and leaves assets to Mom. Mom doesn't need the assets and she wants to see the children enjoy their inheritance from their father. Mom might disclaim the inheritance.

Example: Mom dies leaving her estate to her two children. One child decides that he does not need the inheritance and decides to renounce and allow (due to Mom's governing documents) child's children to receive the inheritance. Disclaiming prevents the child from having to accept the inheritance and then give it away pursuant to federal gift tax annual exclusion limits.

Example: A Traditional IRA owner dies. The primary beneficiary decides that it makes more tax sense to disclaim her portion of the IRA and allow the IRA to pass along to the contingent beneficiaries because the taxable required distributions will be smaller to the contingent beneficiaries.

A "Disclaimer" is generally a federal tax term which allows people to formally refuse an inheritance. It prevents someone from having to accept an inheritance, and then donate it away. Particular disclaimer tax rules must be followed, including the requirement that the disclaimer be in writing, within nine months of death, and the disclaimant cannot accept any of the benefits of the disclaimed assets.

Renunciation is the Louisiana term for this. If a renunciation is to take place, it must do so in that window of opportunity after the date of death but before the disclaimant receives any assets or other benefit from an inheritance.

Disclaimer/Renunciation planning should be considered in many estate planning programs, both the post-death opportunities should be explored, and the incorporation of written disclaimer provisions in your governing will or trust legal documents as you put your estate planning legal program into effect.

One area where some get confused is that you cannot renounce an inheritance to get out of paying your debts or to get out of paying for the nursing home. Your creditor may accept your succession rights if you renounce them to the prejudice of your creditor's rights. And the Louisiana Long Term Care Medicaid Manual treats a renunciation as if you accepted the inheritance and then gave it away - triggering penalties for uncompensated transfers of resources.

Again, really important that you work with the right people to set things up the right way, 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

What If Heir Refuses To Accept Inheritance Of Money or Item?

Occasionally, for unfortunate emotional or relationship issues, there is an heir of an estate who refuses to accept either the inheritance of money or the inheritance of a specific item. This can cause the probate or Succession to come to a screaching halt, causing delays and expense for everyone involved.

While it is not uncommon for an heir to formally "disclaim" an inheritance for a variety of reasons, such as income, gift, or estate tax reasons, it is uncommon for someone to fail to communicate even though a small amount of communication could result in a financial windfall for the individual.

Louisiana Succession law has a procedure to address this. If an heir refuses to accept and sign a receipt for an inheritance of funds, then, after a hearing, the court may order an executor to deposit the funds in either a state or national bank, or in the registry of the court to the credit of the person entitled to the funds. A receipt showing the court that the deposit was made is sufficient to allow the executor to be discharged.

If an heir refuses to receive an item (called in Louisiana, a "corporeal movable"), then the court may direct the executor to make some other disposition of the item.

It is worth noting that this same thing can happen when a trust beneficiary refuses to accept a distribution of trust principal. While our trust code does not specifically address this issue, it would make sense that these funds sit in a trust account for the benefit of the refusing beneficiary, or perhaps the trustee could petition the proper court for some direction.

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

Child Dies Before Parent: What Happens To Estate?

Typically toward the end of the estate planning conversation, a client asks the question, "What would happen to my estate if my child dies before me?"

There are a few different components to this question. First, if a Louisiana resident dies with no legal planning in place (no last will means they died "intestate"), then state law determines who gets what. For example, let's say Dad dies. Two years earlier, Daughter died. Daughter left three children. If Dad died intestate, Daughter's three children would inherit the portion that would have gone to Daughter. Daughter's three children "represent" their mother in Dad's Succession.

Now, let's say, Dad left a Will or a Trust when Dad died. Now, the estate planning legal documents Dad signed control what happens to Dad's estate. Most estate planning documents have, as a default provision, a statement that says that if a child predeceases a parent, then the child's share will go the child's children. However, when a person is putting an estate legal program in place, they can direct their estate as they wish. Many parents express that if their child predeceases, they do not want the child's share to go to the child's spouse or the child's step-children. Or some grandparents have grandchildren that have substance abuse problems and the grandparents do not want to dump an inheritance into a grandchild's lap. So, it's important to address these contingencies as you create your estate legal program.

What you can't do, however, is leave an inheritance to a child and then direct what happens to that inheritance when the child later dies. Once you leave an inheritance to someone (such as, a child), the inheritance belongs to the person who you left it to. You cannot control what they do with it. However, by leaving an inheritance in trust you may be able to exercise more control over what happens to the inherited assets after you pass away.

Nine Elements of a Louisiana "Avoid Probate" Estate Legal Program

Many seniors in Louisiana express a desire that their family and loved ones avoid the court-supervised probate process when they die. Because every family is unique and each person or couple owns different types of assets, it's important that they have a foundation for their Program. The following is a description of nine different elements of the Louisiana "Avoid Probate" Estate Legal Program.

(1) Revocable Living Trust. Their Revocable Living Trust ("RLT") is the foundation of their program. This is the customized legal instrument where you state who is in charge of your trust when become incapable or when you die, who will inherit or receive distributions from your trust after you die, and it will also state the rights and obligations of all of the parties that are involved. Your RLT really replaces the traditional "Last Will and Testament." The disposition of your trust assets are controlled by your trust instrument, not your Last Will and Testament.

(2) Pour-Over Last Will and Testament. If you happen to own any assets in your name when you die, and the title of which becomes frozen when you die because they are in your name, your Pour-Over Will is necessary. The executor of the WIll, after your death, will hire an attorney and go through the court-supervised Succession procedure to have those assets in your name transferred to your trust. Note that many people who set up an "Avoid Probate" Legal Program never need to utilize the Last Will because all assets will be titled in a way making the Succession unnecessary. "Funding" your trust (or re-titling your assets) is a critical step in the process so that nothing is left in your name when you die that would require a judicial proceeding.

(3) Durable Power of Attorney. This can also be referred to as Financial Power of Attorney, General Power of Attorney, or POA. An example of when this may be needed is when you are incapacitated and there is an IRA in your name and you are unable to transact the IRA due to your incapacity. Your POA should enable your "Agent" to act on your behalf at the financial institution where the IRA is held.

(4) Health Care Power of Attorney. Also called a Medicaid Power of Attorney or Health Care Proxy. This will enable your trusted family member or friend ("Agent") to talk to doctors and access your medical records in the event you are unable to do this yourself.

(5) Living Will Declarations. This is the legal instrument where you make your wishes known regardling life support machines. People who execute Living Wills typically want to relieve their family from the burden of making an end of life decision by putting their wishes on paper, in advance.

(6) Asset Transfers. All of your funding and re-titling documents should be organized in the Asset Transfers portion of your Estate Legal Program. This is where transfers of real estate, investments, and business interests are documented.

(7) Burial and Funeral Wishes. Part of completing your Estate Legal Program may involve informal documentation of your wishes regarding certain aspects of your passing, such as your burial and funeral wishes. 

(8) Distribution of Personal Effects. Some people provide for the distribution of their non-titled personal effects (jewelry, furniture, guns, etc.) in their formal legal documents. Others take a simpler approach and make an informal list of how they want their personal effects disbursed. Check with your attorney regarding the best way to provide for the distribution of your personal effects.

(9) Trustee Education. Since the establishing of an estate legal program may be new to you, your attorney should provide both you and your Successor Trustee(s) with education and instructions as to how to best serve as a Trustee of Co-Trustee. 

While every client is different, with different needs, this should give you a pretty good example of what the typical estate planning program consists of. Now go take care of business!

Paul Rabalais
www.RabalaisEstatePlanning
Law Offices: All over South Louisiana
Phone: 866-491-3884

Louisiana Usufruct and Long Term Care (Nursing Home) Medicaid

We get lots of questions about whether people who own the Louisiana usufruct can qualify for Louisiana Long Term Care Medicaid benefits.

So I'm sharing information today with you from the Louisiana Medicaid Eligibility Manual regarding usufruct and Medicaid.

When someone who owns a usufruct is in a nursing home and attempting to qualify for Medicaid, the first thing you want to determine is whether their usufruct is over a consumable or a nonconsumable. 

If the person owns a usufruct of a consumable, such as money, certificates of deposit, promissory notes, bank accounts, etc., then the entire amount of the asset's value is a Countable Resource. So, if Dad died leaving Mom the usufruct of a bank account that had $200,000 in it when Dad died, then the entire amount is considered a resource of Mom. Some people mistakenly believe that since there are naked owners (typically, the children), that Mom does not have to consume these assets in the nursing home.

If the usufructuary owns the usufruct of a nonconsumable item, such as land, houses, shares of stock, etc., then the value of the usufructuary's usufruct must be determined by a Medicaid table that factors in the usufructuary's age. So, for example, if Dad died and left Mom the usufruct of a piece of land worth $100,000, and Mom is 80 at the time of her Medicaid application, then the table indicates that Mom's usufruct is worth 43.659% of the asset. So, by Mom owning the usufruct of a piece of land worth $100,000, she has a Countable Resource valued at $43,659. This is a problem for Mom. Perhaps she will need to sell her usufruct for this amount and then consume all of that money before successfully qualifying for Medicaid.

The problem here is that there is little that can be done at the last minute to solve this problem. But there's lots that can be done if you act early (ideally, at least five years before entering the nursing home. 

Find this helpful, go LIke our law firm's facebook page at Rabalais Estate Planning, LLC, and discover lots more.

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.

How a Surviving Spouse Owns Home After Inheriting the Intestate Louisiana Usufruct

Whenever a Louisiana married resident dies owning a home with their spouse, and they pass away without ever having signed a Will or Trust (they died "intestate", issues always arise.

I was working with a surviving husband whose wife had died a few weeks earlier. The surviving husband really wanted to own their home. He said that he may want to sell it in the upcoming months or years, he may want to create a home equity line of credit, and he also said that while he has no plans for remarriage, he would want to be able to provide a roof over a new wife's head if he dies before her.

When he came into my office he told he that she had never signed a WIll. He "assumed" that he would own the house since they bought it together and it was paid for. But his assumption was false. I had to tell him that since his wife passed away without any estate legal program in place, that he would continue owning his "one-half" of the house, and that he would be inheriting the "usufruct" of his wife's half of the home until the earlier to occur of his death or remarriage. I further told him that their children would inherit the "naked ownership" of her half of the house.

Some Louisiana folks mistakenly believe that when a married person dies without a Last Will, then half of the deceased's half would go to the surviving spouse, and the other half of the deceased spouse's half would go to the children. But this is an incorrect assumption.

The husband asked me how in the world could he get ownership of the house solely in his name. I told him that we would need to complete his wife's succession first. The succession will require that the home be re-titled so that their children are naked owners of his deceased wife's half of the home, and the surviving husband would own the usufruct of her half until he died or remarried.

Then, his children will sign the necessary paperwork to donate their naked ownership interest back to their father. This would enable the surviving father to have "full ownership" of the home. He needed the children's cooperation to obtain full ownership but the children were completely supportive of the concept of their father owning the home that he had acquired and paid for.

In order to avoid sticky situations when a family member or loved one passes away, it always makes sense to take care of this ahead of time and create an estate legal program that makes settling your estate easier and the right way.

If You Don't Want To Leave A Windfall

I was working with a couple recently that had done well during their lifetime, and they wanted to benefit several people and family members when they were gone. But they specifically stated that they did not want to leave people a "windfall."

They were leaving a significant sum to a number of different people but they told me that they wanted to leave these people, "5% each year so  they get it over 20 years."

Now I've seen many trusts written in a way so that it says that the beneficiaries get 5% per year. But this is not often the intent of the person establishing the trust.

In short, of the beneficiary gets 5% of the trust principal each year, then the principal will never fully be paid out. Instead, trusts often should be drafted in a way so that the beneficiary receives a fraction of the trust distribution each year. For example, in the first year, the beneficiary receives 1/20th of the trust principal. In the second year, the beneficiary receives 1/19th of the balance of the trust principal. In the third year, the beneficiary receives 1/18th of what's left, and so on and so on. This formula provides for generally equal distributions of all trust principal over a period of 20 years.

There is an unlimited number of ways that you can leave an inheritance to an heir without them getting a "windfall" that they would blow. This is just one method. You just need to make sure that the trust language is consistent with your intentions. 

If you live in Louisiana and want to simply start a conversation about protecting your estate, call our toll-free number at 866-491-3884.

Louisiana Succession With Land, a Mobile Home, and Bond Mutual Funds

Working with a really nice family getting their parents' Successions completed. Met with all of the children a couple of times as we developed an efficient plan for getting everything done. The parents' had Wills essentially leaving everything to the children equally. The Wills named two of the children as the co-executor. After going through quite a bit of information and discussion, our firm will be leading them through the Succession process that will look something like this:

  1. Step One - Confirmation of independent executor. We have already prepared, and all of the heirs have already signed, the initial court paperwork to get the executor "confirmed." Since the Will was written prior to 2001, we had to get all of the heirs to sign this paperwork. As an independent executor, the executor can take certain actions without having to get a judge's approval first.
  2. Step Two - Estate account. Once the executor is confirmed by the court as the independent executor, the clerk of court will issue "Letters of Independent Executorship." The executor will then take these "Letters" to the brokerage firm and establish an estate account at the brokerage firm. The parents' brokerage account is currently frozen. But with the Letters, the brokerage firm will be required to establish an estate account and move the investments from the frozen brokerage account into the new estate account.
  3. Step Three - Managing the estate account. Expenses of the estate will be paid from the estate account. The family decided to sell the investments in the estate account so that cash will be readily available to pay expenses and ultimately, distribute to heirs. The refund check from the nursing home that is payable to "Estate of....." will be deposited into the estate account. The proceeds of the sale of the mobile home will be deposited into the estate account.
  4. Step Four - Detailed Descriptive List of Assets and Debts. Our office will prepare the required Detailed Descriptive List of Assets and Debts that the court must have before assets can be distributed to heirs.
  5. Step Five - Judgment of Possession. Our office will obtain the necessary court Judgment which orders third parties to transfer assets to the four heirs. A certified copy of this judgment will be recorded in the parish where the family owns land - this makes the heirs the new owners of the property. After expenses of the Succession are paid, the executor will distribute remaining funds in the estate account to the heirs, equally, in accordance with the Last Will of the parents.

There you have it. Often glitches appear when settling an estate and it's likely that "stuff" will pop out of the woodwork as we work on this, but wanted to give you an idea of a few of the steps that are involved in completing a Succession.

Let me know if a loved one has passed away, and the heirs want a simple and expedited process for getting all matters settled.

Lafayette,Louisiana Family Benefits From Dad's Estate and Medicaid Planning

I've been working with a Lafayette area family lately. Dad has his home, his life savings, and a couple of other pieces of property, and he wants to make sure his kids get it when he dies. His biggest threats to his children, as he sees it, are:

  1. Losing the assets due to a long-term care nursing home stay;
  2. Taxes; and
  3. Probate

A large part of his life savings is tucked away in his Individual Retirement Account (IRA). He also has investments held in an account that is not an IRA, and he has some money in bank accounts.

He realized that his IRA is threatened. He knows that any distributions from the IRA during his lifetime or after he dies will be subject to income tax to the recipient of the distribution. He was questioning whether taking required minimum distributions each year was the smartest way to handle his IRA. Here's what he said:

"If I just keep taking my required distributions, then I will pay tax on those distributions and the remainder of my IRA will continue to grow tax-deferred. All of the future growth will be ordinary income to whoever receives a distribution and those distributions in the future could be taxes at a rate as high as 40%, particularly if they go to my kids. Plus, if I go to a nursing home, I will be forced to take large distributions, pay the income tax, and then spend the remaining amounts on my nursing home expenses."

Then he asked:

"Wouldn't it be better if I took larger distributions that the required distributions, pay the tax, and then place the after-tax proceeds in a special trust account where it will be protected from my future nursing home expenses? Oh, and since the trust is a Grantor Trust, any future appreciation of my investments after I take it out of the IRA will passtax-free to my kids due to the step-up in basis that they will enjoy when they sell the assets after my death?"

His analyses appears to make a lot of sense. Most people are encouraged to keep every penny that they can inside their IRA. I'm not saying that's wrong every time, but as long as the investments grow inside the IRA, then a big chunk of each distribution will go the IRS. If the IRA goes ahead and takes distributions faster than required, and pays the tax on those distributions, then future appreciation would escape taxation due to the step-up in basis. Plus, if the IRA owner takes distributions and places those funds into the right kind of trust, then there is the added benefit of being protected from future nursing home costs.

Anyone who has an IRA and is concerned about future taxes and about losing the IRA to nursing home expenses, should have a conversation with an estate planning attorney who understands not only the estate tax, but the income tax and capital gains tax consequences of taking minimum distributions versus taking distributions larger than the minimum required amount.

Give us a call at 866-491-3884 to start a conversation about how to protect your IRA from the government. Don't wait another day. Every day that you wait could be costing you and your family!!!

Seven New Louisiana Estate Matters That Walked Into Rabalais Estate Planning During The Last Two Days

I have been fortunate to have seven different families, from Metairie, Baton Rouge, Shreveport, Gonzales, and Zachary. ask me to help them with various estate matters over the last two days. Each family has a different situation and a different concern, so I thought I'd give you a general overview of their problems and how we are solving them so that if you have a similar problem you will know that you are not alone and there is someone that can help who has helped others in similar situations.

Here are the seven different situations that families have retained me in the last two days to help them:

  1. Mom's Investment Account Frozen. A gentleman came and met with me two days ago. His mother had passed away and, as a result, her investment account was frozen. Mom and the son had the same investment advisor. The investment advisor suggested that the son come see me so that we could complete the probate (also known in Louisiana as "Succession") to obtain the necessary court orders which will allow the family to have access to Mom's currently frozen investment account.
  2. Want To Protect Each Other and Teenage Child. A couple came in that had been referred by another financial advisor. The couple had a teenage child and wanted to make sure that their "legal affairs were in order" because they had done no estate legal planning in the past. We will be setting up an estate legal program for this couple to make legal matters easy or nonexistent when one spouse dies, and then making sure that guardians and trustees are named for their minor child should something happen to the parents before the child is an adult.
  3. Couple With No Children. Working with a couple that has been married for decades with no children. They have some pets that are important to them. We will be setting up an estate legal program so that when one of them dies, matters will be under the continued control of the surviving spouse, and that after they both pass away, funds will be set aside for the care of their pets, with the remainder of their estate being divided among four charitable causes that they care deeply about. Nice and fun couple - organized too!
  4. Blended Family. Working with a couple each of whom was in their second marriage. They each had one child. The children lived geographically far apart and had not spent much time together. The couple wanted to make sure that protections were in place for each other so that when one dies, there is no interruption from the children, and then when both spouses die, things are in place for the two children to inherit outside of probate and other court legal proceedings being necessary. Another really nice couple.
  5. Protect Mom's Money From Nursing Homes. Working with a family where Mom is currently residing in an assisted living facility. The family realized that all assisted living facilities in Louisiana are private-pay, but they are worried that if Mom's conditions worsens, Mom will have to move to a skilled nursing facility and be forced to spend $6,000 monthly or more on her care.  We are setting up a legal plan for the family so that Mom's money will be protected if she has to reside in a nursing home in the future. Plus, probate will be avoided when Mom dies.
  6. Execute Will. I wrote a Will for a woman many years ago. She passed away recently. I met with the family and they retained us to execute Mom's Will and complete Mom's Succession so that the home and Mom's CDs, and the vehicle, could be transferred 100% into Dad's name. We are also updating all of Dad's estate planning legal documents because he wanted to change how things would be disbursed upon his death.
  7. Plan For Two Children. Now working with a gentleman who contact me after "watching some of my videos and reading some of my blog posts online." He has a rather large estate, much of it in real estate, and he wants to make sure that it goes to his two children the right way and he wants it to be easy for his two children to inherit the property. We also had some discussions about capital gains tax and estate tax to make sure that his children would avoid as much tax as possible as this property gets transitioned to the next generation.

While many people think that estate planning is the same for everyone, you can see from reading these seven examples that every family and every individual has a unique situation that requires unique solutions. If you have an estate that you want to protect for your family, feel free to give my office a call at 866-491-3884 to start a conversation about the easiest ways to protect what you have for your loved ones.

Paul Rabalais

 

Importance of Documenting the Accounts in a Louisiana Succession After the First Spouse Dies

We started working on a Succession today out of our Baton Rouge office. The wife had passed away. Her husband was talking to me about helping the family get the Succession complete. The couple had been married for about 20 years, but they each had children from their prior marriages. The deceased wife had two children. The surviving husband had three children. The husband said that, for now, the relationships were good between himself and the two sets of children. He was hoping that the fact that his wife's estate needed to be settled would not harm the relationships among all of the parties involved.

Usufruct To Spouse - Naked Ownership To Children

We discussed how her wife left a Will leaving him the lifetime usufruct of her estate, and she named her two children as the naked owners. He stated that he wanted his three children to inherit his estate when he dies.

He brought in a list of all of the various bank accounts and investment accounts. They had about five bank accounts, an investment account at Fidelity Investments, and they owned a home worth about $500,000. We discussed how important it is now to fully document all of the bank accounts, investment accounts, debts, credit card balances, funeral expenses, and medical bills outstanding, because when the husband later dies, the children of the two spouses will look back to how the assets were listed when the first spouse dies to determine who inherits what after the surviving spouse dies.

I gave the husband an example. I said, "Let's assume that the two of you owned bank accounts totaling $200,000 when your wife died. Let's also assume that the two of you had credit card and home equity debt of $40,000. Further, let's assume that there were $15,000 of funeral expenses. What all of this means is that when you die, your estate will owe your wife's children $65,000."

Usufructuary Accounting

He asked me how I came to that calculation. So I said, "Well the $200,000 of bank accounts are community property so you each own half of those accounts. As the usufructuary. you own your half of the accounts, and your estate will owe your wife's children her half of the accounts when you die. So, let's start with the fact that you will owe her children $100,000. Now, since there was $40,000 of community debt, your wife's share of that is $20,000, and you can deduct $20,000 from what you owe her children. And since there were $15,000 of funeral expenses, you can also deduct that amount from what you owe. So, $100,000 minus $20,000 minus $15,000 totals $65,000. That's the amount your estate will owe your wife's children when you die."

Then, we started talking about their home. The surviving husband said he intended to sell the home in a few months and move into something smaller. So I gave him another example regarding their home. I said, "Let's say you sell the home in six months for $520,000. At that moment, you converted a nonconsumable (the home) into a consumable (cash). If you sell the house for $520,000, you will get to keep all of the money, but upon your death, your estate will owe your wife's children $260,000 (one-half of the sales proceeds). 

The mistake many families make is that even though money typically does not go to the children upon the death of the first spouse, it is critical to properly document the assets as part of the Succession process. If things are accurately documented in the Succession (also known as "Probate") when the first spouse dies, it will make it much easier to accurately divide the assets after the surviving spouse dies. Shoddy records after the first spouse's death will likely lead to estate settlement disputes after the surviving spouse dies because the families will often have to "guess" at what assets and accounts existed years earlier when the first spouse died and there are no longer records from years earlier.

Louisiana Statewide Succession and Estate Planning Legal Services

If you want to set up an estate legal program and you live in Louisiana, whether you live in Baton Rouge, Covington, Metairie, Lafayette, Lake Charles, Shreveport, Monroe, or Alexandria, or if you've lost a family member and you want to make sure that the estate settlement is handled the right way to avoid disputes, now or later, among family members, give our Louisiana toll-free number a call at 866-491-3884, and we will be happy to have a conversation about how easy it is to do it the right way, the first time.