Baton Rouge estate planning

Banks and Brokerage Firms: We Hardly Use Letters Testamentary These Days

After a Louisiana resident passes away, a surviving loved one often goes to the deceased's bank, credit union, or brokerage firm, in an effort to settle the estate of their loved one. The financial institution promptly responds by saying something like, "Your loved one's accounts at this financial institution are all frozen. You must bring back "Letters Testamentary" or "Letters of Administration" in order to gain access to funds.

These days, the financial institutions are asking for the wrong things. They should be requesting "Letters of Independent Executorship" or "Letters of Independent Administration."

Since 2001, Louisiana has authorized the independent administration of estates - less court supervision. Virtually all Wills written since 2001 authorize this procedure. And if a Will does not authorize it, then the heirs can agree to operate under this independent administration procedure.

After a death, when the family gets the executor confirmed, and if the executor is acting as an independent executor (which is the case in an overwhelming majority of Successions), the court does not issue "Letters Testamentary." The court issues "Letters of Independent Executorship."

So the bank requests Letters Testamentary, and then we have to tell them that we will not give them what the bank is requesting. We will give them Letters of Independent Executorship.

It would be easier on everyone if the financial institution tells the survivors of its clients and customers that they can bring in the Letters of Independent Executorship to gain access to the funds of the deceased.

To some, this may seem to be a trivial matter. But when we deal with so many confused survivors, anything the legal and financial industries can do to help those in need at a difficult time would make everyone's job easier. Just my two cents.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

Phone: (225) 329-2450

Is Estate Tax Owed on Living Trust Assets?

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

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

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

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

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

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

If You Have Usufruct, You Have Debt

This post should help you understand the full consequences of either leaving someone the Louisiana usufruct of an estate, or inheriting the usufruct of an estate.

Here's an example. Dad dies leaving a Last Will which left the usufruct of his estate to Mom. Together, Mom and Dad had about $1 million in the bank (checking, savings, and a number of CDs). About a year later, after Dad's Succession was complete, all of these bank accounts were put in Mom's name only - which the usufructuary is permitted to do. Family circumstances warranted that Mom change her Will. Mom died a couple of years after that.

All of Mom's heirs assumed that since all of the money was in Mom's name, and that Mom left a Last Will and Testament, that all of the money would go to them. But there were dead wrong - pun intended.

Since Dad left Mom the usufruct of his estate, Mom (or Mom's estate) owed a debt to Dad's heirs (also called a usufructuary accounting due to the naked owners). Dad had left Mom the usufruct of about $500,000. That "usufructuary debt to Dad's naked owners" needed to be satisfied first before any of Mom's heirs inherit a penny.

And if Mom had spent some of the money and only had enough at her death to satisfy the usufructuary debt, then Mom's heirs would not inherit - even though she had a very clear Will leaving her money to her heirs.

While usufruct can be appropriate in some circumstances, you and your spouse need to be aware - on the front end - about what might happen on the back end. While usufruct might be the way to go, there are a number of other alternative ways you can leave your estate to your loved ones. To start a discussion, call our office at 866-491-3884.

Go TIgers!

How To Structure Bank Accounts To Avoid Probate

One thing that frustrates families when they attempt to settle an estate is when they find out that any and all bank accounts that the deceased had are frozen by the financial institution, regardless of the amount of the accounts. Meanwhile, funerals and other expenses need to be paid.

People try every trick in book to outsmart the banks and the courts from freezing the accounts. The following are the top three ways people in Louisiana keep their bank accounts from being frozen at death.

(1) Add a Signer. Many "Do-It-Yourselfers" go to the bank and, perhaps, add an adult child or two as an authorized signer on their bank accounts. This often works, however, there is at least one major bank in Louisiana who will freeze the account at death even if there are other authorized signers on the account during the life of the account owner. So, check not only with your estate attorney but check with your bank.

(2) Payable on Death. Some Louisiana banks permit bank account owners to complete paperwork so that they make their accounts "Payable on "Death" (or, POD) to another person or people. This doesn't give anyone access to your account while you are alive, and the Designees must produce your death certificate to access the funds, but at least they will be able to receive the funds without having to go through a Louisiana Succession. Warning: Louisiana law does not entitle the designees to own the funds, POD simply releases the banks from liability for releasing the funds to the designees. If your estate planning legal documents differ from your POD designation, conflict may occur. And not all banks offer a POD designation.

(3) Trust Accounts. If you have a Living Trust, you can make your bank accounts trust accounts. When you die or become incapable, your Successor Trustee will have access to the accounts. Accounts won't be frozen. In the typical scenario, when you die, your Successor Trustee produces the trust instrument to the bank for approval, and then the Successor Trustee gains access to all trust bank accounts, and then disburses the accounts immediately to the trust beneficiaries without probate cost and delay.

Handling your bank accounts with an eye on estate planning can be tricky. It's a process that we go through with each client. But it's worth it when you arrange things so that your family has ease and simplicity instead of delay and frustration.

Paul Rabalais
Phone: 866-491-3884
Offices: All over South Louisiana

Divorced Business Owner Sets Up Estate Legal Program For Minor Children

I was working with a divorced business owner recently. His financial advisor recommended that he come see me. The business owner had been very successful in business, but he knew little and had no previous exposure to estate planning.

It was kind of funny when he said he wasn't sure what he needed from me, but he knew he needed to do something to protect his estate. I started a conversation by letting him know what would happen if he died with no legal plan in place.

I told him, "If you die with no legal program in place, then all of your assets will be frozen immediately. Your ex-wife will hire an attorney to start the probate proceeding. Your ex-wife will kick your fiancé out of your house. After several months or years of court proceedings, your ex-wife will start to gain control over all of your assets, including your businesses. Your business partners will have to co-own your businesses with your ex-wife. Your ex-wife will have the right to hire another set of business attorneys to search and review all of your business records. One of our local elected judges will be in charge of over-seeing how your ex-wife is handling everything on behalf of your four minor children. Ultimately, if the court proceedings ever end, your ex-wife will gain complete control over your estate. If she does not pay the $1.5 million estate tax bill within nine months after you die, interest and penalties will accrue against your estate. Then, as your children reach their 18th birthday, they will sue your ex-wife who will be forced to dump roughly $2 million into your childrens' laps, likely spoiling any desire they may have to get a good college education."

He said, "That would not be good for my four kids, my fiancé, my business partners, or my ex-wife. I don't think my ex-wife would be the best person to handle my children's inheritance." 

About an hour later, after much discussion about his family, he was anxious to put in place an estate legal program so that, when he dies, the right people will be put in charge of managing his estate. Probate will be avoided so the courts and judges and lawyers would be kept out of his estate. He designated a trusted and responsible colleague to handle the trusts for his four children so nothing would be dumped into their laps at age 18. His children would have money available to them for their college education, and they would receive their inheritance in stages at later ages. Plus, we set up the trusts for his four kids so that if they get married and divorced, they will not have to split the inheritance with their spouse.

We also had a discussion about the estate and gift tax. He was surprised to learn that if he stayed single, then only $5.45 million of his estate would escape the 40% estate tax. But if he gets married, then through the appropriate use of the marital deduction and portability, he could protect $10.9 million from the 40% estate tax.

Bottom Line: If you are divorced with children, and you don't want your ex-spouse to control everything when you die, and if you'd prefer that what you've worked for doesn't get dumped into your kids' laps at age 18 (after being overseen by judge until then), then perhaps you should give us a call at 866-491-3884 so we can start a conversation so that you can sleep well at night knowing all of your estate legal affairs are in order.


Baton Rouge Couple Wants To Keep All Estate Affairs Private

I was working with a couple today. They own quite a bit of real estate. They own property in Baton Rouge, Zachary, St. Francisville, New Roads, Prairieville, and St. Amant. One of the most important things they want to accomplish is to provide for an ultimate distribution of their property to certain family members, without the other family members having any knowledge of it.

They ruled out making all of these bequests in their Wills, because they know that when they die, it is required that their Wills be filed into the public record for all to see.

They were also concerned about putting their Louisiana real estate in their revocable living trust, because when real estate is in a trust, a summary extract must be recorded in the parish. This extract must show who the parties in the trust are.

But we worked out a solution where he could keep all of his estate planning legal affairs private. He put his different pieces of property in LLCs, and he provided for the distribution of the LLCs in his revocable living trust. Therefore, nothing needs to be filed in the public records since the trust owns no property. The trust owns membership interests in LLCs. So, the people who they intentionally left out of the trust will not be able to determine who the properties or LLCs were left to.

If you live in Louisiana and you want to engage an estate planning attorney to keep all of your estate legal affairs private, out of the public court system, and out of the court-supervised probate proceedings, then perhaps you should email me at to determine whether we should talk about how to get it right.

Should Louisiana Real Estate Be Put In Trust If It's About To Be Sold

I met with a couple today that was about to retire. They had about four different pieces of real estate. They owned property in Baton Rouge, Metairie, New Roads, and Shreveport.  Real nice couple - two kids and four grandkids. Seemed to be a pretty normal family - and we don't see many "normal" families anymore.

They had two main concerns. First, they said they wanted to avoid probate. Second, they said they wanted to avoid losing everything they had if one or both of them had to go into a nursing home in the future.

We decided to postpone any Medicaid Planning. They were relatively young, but the big issue is that they had a significant sum in their 401(k) and IRAs. It's harder to protect IRA and 401(k) assets from nursing home expenses in Louisiana, because these assets are countable resources. To get a 401(k) account or IRA out of your name, you have to take the money out of the account and pay all of the income tax - this strategy did not make sense to any of us. In addition, the husband already owned a long term care insurance policy so they had "some" protection in place from long term care expenses.

Regarding their desire to avoid probate, we discussed setting up their revocable living trust so that the following would happen:

  1. The couple would stay in control of everything while they were alive and able;
  2. The surviving spouse would stay in control after one spouse died, with no Succession or probate court proceedings necessary after one spouse dies;
  3. The two children would be the co-trustees of the trust after both parents die, with the immediate authority to sell the trust property and divide remaining assets between the two of them - all without the necessity of a probate or Succession proceeding.

Another issue that came up was whether they would put their Metairie property in their trust now. He mentioned they would sell this property in the next few months. They ultimately decided to keep their Metairie property in their name and they will expedite the sale of the property. Just to be safe though, we could have transferred their Metairie property to their trust (just in case they pass away before the property is sold). and then it would be easy for them to sell their property as trustees of their trust.

Finally, we talked about how easy it would be to sell their home (that will be in their trust) if they decide later in life that they want to sell their home and move to another location. We discussed how they could sell their existing home, and then acquire a new home in the name of the trust - all easy to do.

Their decision to keep their property out of their revocable living trust may have been different if they were trying to protect the property form nursing home expenses. If we were setting up the kind of trust that would protect their assets from future nursing home expenses, then it would be important to transfer all of the property now - to start the five year look-back period. Then, if they sell the property in trust in a few months, the sale proceeds would be deposited in a trust account, but the 5 year penalty period would have started when they initially transferred the property to the trust, not later when the property is sold.