Avoid Tax

As 2016 Comes To a Close . . . 6 Reasons Why Louisiana Families Should Get Their Estate Planning Legal Affairs in Order

Now that we are entering the final quarter of 2016, let's take a look at the most popular reasons Louisiana families, from Houma to Baton Rouge to Lake Charles to Shreveport, engage lawyers to arrange their estate legal affairs.

1. Simplify the Estate Settlement for Loved Ones. No one wants to leave their surviving spouse, children, or other loved ones a legal mess once they are gone. Arranging your estate's legal affairs in a way that makes it easier for those in charge when you pass can be a true gift to your survivors.

2. Designate the Appropriate People to Be in Charge. I worked with a couple recently who wanted to make sure their daughter handled their estate when they were gone. Just as important was to make sure that their son would not be the one to handle their estate. If you don't designate someone in your estate legadel documents to be in charge when you die or become incapable, a judge will select someone to manage your estate. No one knows better than you who should manage your estate when you die or if you become incapable.

3. Avoid Probate. Since it's simple to avoid, many families want to arrange their financial and legal affairs so that their surviving family members can avoid a court-supervised estate settlement. Those individuals who have been through a messy probate in the past are typically the first people in line at our door to set up their estate legal documents to avoid probate by typically, creating a revocable living trust to own their "probate assets," avoiding the freezing of accounts and real estate when they die, and appointing a family member/Successor Trustee to be in charge of distributing trust assets outside of the Louisiana Succession.

4. Specific Asset Distribution. I worked with a couple recently that wanted certain pieces of real estate to go to particular children. If you want to provide that certain assets be passed to along to certain heirs, you have to arrange your estate legal documents to do just that.

5. Avoid Nursing Home Poverty. It's a shame how many people wait to late to protect assets from nursing home expenses that can wipe you out. You MUST engage a qualified estate planning attorney at least five years before you or your loved one enters a nursing home. Otherwise, you may lose your life savings to the nursing home or to Medicaid. Don't dilly-dally around if avoiding nursing home poverty is a top priority.

6. Avoiding Taxes. It's smart to act NOW to arrange your estate legal affairs to avoid tax which can consume a large chunk of your estate when you die.

The bottom line is that everyone has different estate planning priorities but you all know that it's critical to have everything in order. Whether your primary issue involves avoiding probate, avoiding nursing home poverty, protecting minor or irresponsible children, avoiding taxes, putting the right family member in charge, or disinheriting a son-in-law, take action now to get all in order because you never know when your number might be called.

Double Step-Up in Basis Helps Louisiana Families Save Taxes at Death

The traditional married couple estate plan often was established in a way through their Last Wills or the Revocable Living Trust so that when the first spouse died, that spouse's share of the assets would go to an irrevocable trust, whereby the surviving spouse is often the trustee and income beneficiary of the irrevocable trust, and the deceased spouse's children are the principal beneficiaries of this irrevocable trust. The reason many estate plans were established this way was for estate tax avoidance - so that the assets of the deceased spouse (in the irrevocable trust after the first spouse dies) would not be included in the taxable estate (for federal estate tax purposes) of the surviving spouse.

But with the Estate Tax Exclusion Amount now $5.45 million - which is in theory $10.9 million for married couples. It is often irrelevant whether the assets of the first spouse to die get lumped into the surviving spouse's estate for federal estate tax purposes.

Example: Mom and Dad have a combined estate of $3 million - each owns half. Dad dies and structures his estate planning legal program in a way so that his entire $1.5 million estate gets lumped into Mom's estate, so that after Dad dies, Mom has the entire $3 million of assets in her taxable estate. But even if the $3 million in Mom's estate appreciates in value to $4 million prior to when Mom dies, there will be no estate tax when Mom dies because her estate was valued at less than $5.45 million.

The above example assumes that a portability election was not filed on Dad's estate tax return when he died. In fact there was no estate tax return filed after Dad died at all. Had they filed a Form 706 after Dad died and elected portability, Mom's estate would have been able to shield much more than $5.45 million from estate tax when she die.

So, since Mom and Dad don't have estate tax concerns, it would be great for the kids (and not so great for Uncle Sam and the IRS) if there is not only a step-up in basis of the estate when Dad dies, but also another step-up in basis of the entire estate when Mom dies - to eliminate there EVER being capital gains tax on any appreciation from when items were purchased to the date that Mom dies. If the executor, or the trustee, or the kids sell these appreciated assets shortly after Mom dies, they will get all of the proceeds of these sales completely tax-free thanks to the double step-up in basis that occurred at each parent's death.

Estate planning these days involves so much more than just writing a Will or trust or power of attorney. You can save your spouse, your kids, and your loved ones significant taxes - even if you don't have a "taxable estate."