Baton Rouge estate planning attorney

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

Two Types of Louisiana Last Wills: Part One - The Olographic Testament

In Louisiana, there are only two forms of valid Wills (known by our Louisiana law as “testaments.” The two forms are: olographic and notarial. This post addresses the less popular olographic (some people refer to it as an “holographic” Will).

When we discuss whether a handwritten Will is valid, we must look to the terms of the Louisiana statute that defines and olographic testament. Note that there are many, many court cases where lawyers have argued, and judges have determined, whether someone’s handwritten attempt at a Will is valid, and if so, how it should be interpreted.

Nonetheless, our Louisiana law states that “An olographic testament is one entirely written, dated, and signed in the handwriting of the testator.” The statute goes on to state, in part, what it means to be dated and signed, including the fact that writings after the signature do not make the testament invalid and such writing may be considered by the court, in its discretion, as part of the testament.

Many people think that if they just meet the validity requirements of an olographic testament, then everything will go hunky-dory when they pass away. But those people should think again.

It’s easy to make a valid olographic testament, but problems often surface after the death of the testator because the wording was either insufficient, ambiguous, errors were made, reasonable contingencies were not addressed, or bequests were made outright to people when they should not have due to age or financial immaturity.

The bottom line on Louisiana olographic Wills is that it is possible, if not simple, to write your own Will that would be recognized by a Louisiana court as a valid Will. However, if the reason you attempted to write your own Will was to save some costs today, know that the future costs to your estate and your heirs (both financial and emotional costs) will far outweigh any savings you felt you realized by making your own olographic testament.

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

Prohibited Substitution in Louisiana Last Will is Null

The Prohibited Substitution estate planning rules in Louisiana are a trap for the unwary. When someone writes a Louisiana last will and testament, or a trust, in a way that it contains a prohibited substitution, then the bequest is null.

So, what is a prohibited substitution? Well, here's an example of a provision in a Will that would be interpreted as a prohibited substitution, "I leave ownership of X to Person 1. I require that Person 1 preserve X and, when Person 1 dies, I require that Person 1 leave ownership of X to Person 2."

You cannot donate or leave something in full ownership to one person with a charge to preserve it and deliver it to a second person at the death of the first person. You would be depriving the first person from the power of testation.

A prohibited substitution might be something that I'd see in an olographic testament. Some people attempt to write their own wills in their own handwriting, but they mess up the provisions of the Will. People in Louisiana sometimes argue that they can write their own valid will, but they often fail to realize that the wording that they put in their will can make their loved one's lives miserable.

A prohibited substitution is null - it's as if it was never written. The bequest to the first person is not even valid.

There are a couple of alternative you can use if you want to leave an asset for the benefit of someone, and then when that someone dies, have the asset pass along to another someone. One way to do this is to use a trust - check with your estate planning attorney to help you do this the right way. Another option that might be feasible is to leave usufruct of an asset to someone, and name the naked owner to receive the asset at the termination of the usufruct. Again, check with your estate planning attorney to make sure that you understand the pros and cons of leaving things in trust or in usufruct.

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

Forced Heirship Forces Usufruct

Louisiana is the only state with the unique forced heirship laws which, essentially, provide that if you die a Louisiana resident, and you have forced heirs, you must leave your forced heirs are pre-determined portion of your estate.

Forced heirs are defined as children who are 23 years of age or younger, or children of any age who are incapable of administering their estate (the actual statutory definition is more complex).

If, at your death, you have one forced heir, then you must leave that one forced heir 1/4 of your estate. If you leave two or more forced heirs, you must leave them at least half of your estate. Most retirement accounts and life insurance is not included in this calculation.

The practical effect of the forced heirship laws is that that a married person, if they have forced heirs, cannot leave their entire estate to their spouse. Many married people describe that they want "Simple, I Love You" wills which leave everything to the surviving spouse. But this violates Louisiana's forced heirship laws.

And most married parents don't want assets to go directly to the children when the first spouse dies. Most couples feel that when one spouse dies, the assets should be available to the surviving spouse. 

So, if you have forced heirs and you want to leave your estate to your spouse, you have limitations. Many people leave their surviving spouse the usufruct of their estate, and they name their children or forced heirs as the naked owners. Others leave their estates to a trust which makes assets available to the spouse, but when the spouse later dies, trust assets revert back to the children or principal beneficiaries. These vehicles satisfy the forced heirship provisions. In general you can satisfy the forced heirship laws by providing for your forced heirs, but really they don't get their inheritance until after you AND your spouse pass away.

The result of this is that parents, for at least 23 years, cannot have a legal estate planning program where they leave everything they own to their surviving spouse. They must create an estate planning program that complies with the Louisiana forced heirship rules.

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 Review Your Customized Estate Planning Program Prior to Making It Official

When you review your customized estate planning legal program documents, you likely will fall in a range of thought processes from, "I don't need to review anything...just show me where to sign," to "I need to know what every word of every document means, including the definition of 'Pact De Non Alienando'". 

It makes sense, for people who fall in the middle, to want to review the customized portions of their estate plan. Just like when you buy a house and get a mortgage, there is all kinds of legal mumbo jumbo that needs to be in the paperwork.

The following could be a few things that should be reviewed prior to making your estate planning documents official:

(1) Power of Attorney. Is it effective immediately or does it spring into effect upon your incapacity? Do you name one Agent or more than one? If you name more than one, must they act jointly or can they act separately? Did you name any backups?

(2) Living Will Declaration. What did you document regarding the removal of nutrition and hydration if you are in that profound vegetative state with no chance of recovery?

(3) Living Trust. Who did you names as your Successor Trustee or Co-Trustees. What is the distribution schedule after you die? Are beneficiaries to receive their distributions outright or does the trust continue for certain beneficiaries? And if it continues, under what terms? Don't get too caught up in the trustee powers and duties (unless you intentionally wanted to customize these powers and duties).

Once you have peace of mind that all of the substantive components are in order, then go ahead and make it official and have the security that comes with knowing that your legal affairs are in order.

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

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What To Expect - The 1st Conversation With Estate Attorney

The planning and strategy conversation that you have with your estate planning attorney may be the most important conversation you ever have. Too many lawyers like to hear themselves talk. But if the lawyer is doing most of the talking, then it is impossible for the lawyer to customize an estate legal program that covers, in necessary depth, all of the needs of the client. I like to say that God gave us attorneys two ears and one mouth, so we should be listening to clients twice as much as we should be speaking.

Initially, the conversation should start out with an attorney finding out what you most want to accomplish about the transition of what you've worked for from one generation to the next. No two people or couples are alike. But it's the attorney's role to find out what is REALLY most important to you and then dig a little deeper with the right questions so that all of your emotional needs regarding you and your family can be met.

Note that all of this should be done in layman's terms. The best attorneys are the ones who ask the right questions and LISTEN, and then respond with another appropriate question. 

Finally, after some time, the attorney should be able to repeat what your biggest concerns are and how those might be addressed with a customized estate legal program. If the attorney did their job, you will think that what he or she concluded was dead-on (no pun intended) with what you want for yourself and your loved ones. Even though nothing's been prepared or executed, you should have peace of mind that you are underway in having the perfect estate planning program designed.

Then, it's just a matter of implementation.

Paul Rabalais
Louisiana Estate Planning Attorney
www.RabalaisEstatePlanning.com

A Last Will and Testament Ain't Asset Protection

Was working with a Louisiana couple that came in to discuss getting their estate legal affairs in order. While different people have different priorities when it comes to estate planning (taxes, nursing home expenses, probate, blended families, children who spend, disabled children, in-laws you don't like, protect grandchildren, who will be in charge, health care decisions, to name a few), this couple perceived their biggest threat the potential to lose their savings and home to nursing home expenses. One of the spouses had an illness that didn't pose an immediate threat to independent living, but there is certainly the likelihood down the road that long term care will be needed.

One of the spouses, who was not real educated, mentioned on one or more occasions something like, "While I kinda heard that when it comes to estate planning, all you need is a Will." 

I get that in coffee shops and in barber shops people give advice to their friends and colleagues. But when it comes to the intricacies and varied issues involved these days, one-size-fits-all advice just doesn't work.

Obviously, if you write a Last Will and Testament, you are going to leave all of your assets in your name. If you have assets in your name and you go into a nursing home, you must spend your assets first before Medicaid pays for the care. They let you keep your home but Medicaid will have Estate Recovery rights so that when you die, your home must be sold to reimburse Medicaid for what they spent on your care - after you spent all of your own money.

Because there is uncertainty in life, I don't know how this family's story will end. They've worked hard to accumulate what they have. It sounds like their children and grandchildren could really benefit from an inheritance. But only time will tell what will happen in the future.

Paul Rabalais
Estate Planning Attorney
paul@RabalaisEstatePlanning.com
Phone: 866-491-3884

Difference Between Pre-Nup and Will or Trust

I was working with a couple recently. Each spouse had children from a previous marriage, and they wanted to make sure their estates were set up the right way to protect themselves, their spouse, and their children - the right way. They knew there was the potential for conflict when they die because the sets of children did not know each other very well, and we all know what happens when people who do not know each other well have to share an inheritance!

The couple had a pre-nup from before they got married about 20 years earlier. Note that pre-nup can also be referred to as "Marriage Contract," or "Separate Property Agreement." They also had old Wills. Some of the provisions of the Wills were in conflict with what the pre-nup stated.

This led me to want to educate you about the difference between the two. In general, the purpose of the pre-nup is to determine who owns what. In the typical pre-nup when spouses get married later in life, and they each have their own children, the spouses will want to deviate from the presumed community property regime, and they will want to keep everything as separate property - what the husband has and what the husband earns during the marriage is HIS, and what the wife has and what the wife earns during the marriage is HERS. So it is real clear who owns what when one of them dies (or, if they get divorced) - no community property. The pre-nup is not the place to say who gets what when you die. In Louisiana, each party is represented by a separate attorney, each party signs the pre-nup, and it is typically recorded at the courthouse. It's a contract.

The Last Will, or the Revocable Trust, dictates who gets what when you die, and who is in charge of the administration and distribution. The WIll or Trust is not the place to try to control what is separate and what is community. Sure, your assets may retain their community or separate property status when placed in a trust, but the WIll or Trust should merely be used as a vehicle to dispose what you own, not declare what you own with your spouse.

Too many times we see conflict between the provisions of the Marriage Contract and the Last Will or Trust. You are asking for trouble if that is the case. Make sure you understand the role of each so that there will be a simple and quick estate administration when you die, with everyone (and the lawyers) being clear on everyone's rights.

Living Trusts and Income Tax

As we discuss an estate planning program with our clients, some of our clients that they would like to arrange their estate to avoid the court-supervised probate estate administration at their death, but they are concerned about how setting up a Revocable Living Trust might affect their income tax situation during their lifetime.

When you create a Revocable Living Trust, you will be what's referred to as the "Grantor" or "Settlor." You can amend or revoke the trust at anytime, and you are entiled to receive all of the income that the trust assets produce during your lifetime.

While there are many different types of trusts, this type is arranged so that you are still taxed on all income earned by the trust assets. You continue to use your Social Security Number on all trust bank and investment accounts. The trust does not need its own Tax Identification Number. As long as you live, all of the income is reported on your own personal income tax return, so you won't need to file a separate trust tax return.

Some people like that their trust does not complicate or change their tax status, but the assets in the trust will avoid the Louisiana court-supervised probate estate administration upon their death.

www.RabalaisEstatePlanning.com

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What Assets DON'T Go Into the Louisiana "Avoid Probate" Living Trust?

When someone asks me to set up an estate legal program to avoid probate, they often ask me something like, "Do ALL of my assets need to be in my trust to avoid probate?"

It depends on what kinds of assets that you own, but most people do not need to transfer all of their assets to their trust. Some assets that you own, by their nature, avoid probate.

IRAs and other retirement accounts, avoid probate. When you die, your IRA is payable to your designated beneficiary, outside of probate. In fact, IRA rules do not allow you to transfer your IRA to a trust during your lifetime. This applies to both traditional and Roth IRAs - they avoid probate.

When avoiding probate is the primary goal, ownership of life insurance does not need to be transferred to your living trust. When you die as the insured, your life insurance death proceeds will be payable to the beneficiary that you designated.

Annuities are another example of an asset that avoids probate, just like life insurance.

Note that it might make sense to name a trust as the beneficiary of these non-probate assets, but check with your estate planning attorney to determine the appropriate way to designate beneficiaries on your non-probate assets.

Seven Common Uses For Trusts

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

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

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

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

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

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

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

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

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

Two Biggest Louisiana Estate Planning Misconceptions

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

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

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

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

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

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

What other estate planning misconceptions are out there?

The Right Kind of Louisiana Trust Protects Estate From Nursing Home Costs

Been working with a Louisiana couple who's main concern was losing assets to nursing home expenses in the future. They had a revocable living trust set up years ago by a non-lawyer group. They were hoping that their existing trust would protect those assets from their future nursing home expenses.

Several of their family members had lost everything due to extended nursing home stays. This couple owned a home, rental property, as well as stock and mutual funds.

We quickly realized that their revocable living trust gave them no protection from nursing home costs in the future. So, part of their new estate legal program for these Louisiana residents includes establishing the right kind of trust that allows them to remain in control of their estate, yet have it structured in a way that their two biggest threats to estate depletion (nursing home costs and probate) are no longer a concern.

If you'd like to start a conversation about how you can protect your home and life savings from government interference, give our office a call from anywhere at 866-491-3884

"Probate Can Be a Hassle - Sometimes a Very Expensive One," says Motley Fool

Motley Fool article describing hassles of probate

Sometimes I run across articles in the newspaper or in a magazine that I like to forward along to readers on this site. Here's an article that I read this morning that advocates for estate planning as a way to avoid a lot of "expense, heartache, aggravation one day."

In the third paragraph of the article, Motley states, "Probate can be a hassle - sometimes a very expensive one. Also, property remains in limbo while in probate, which can last months or even years."

So, how of you avoid probate? Well, you do what it says at the bottom of the article - "Learn more by reading up and consulting a professional." You can certainly read and learn on this very website, and you can consult a professional by picking up your phone and dialing our toll-free phone number, 866-491-3884. Or, you can register for one of our upcoming events on our website's Events page. But do something.

As the article provides, "Above all, don't die "intestate" - without leaving behind a will or trust. In such cases, the government follows strict procedures, dividing your property according to formulas. The formulas can work well, or they can leave your heirs upset and taking each other to court."

Thanks Motley Fool for continuing the educate the public about the importance of estate planning.

Louisiana Family Wants Estate Plan That Does 2 Things: Avoid Probate and Protect From Nursing Homes

Was working with a couple recently that had three grown children. One child lived in Lafayette. Another child lived in Lake Charles. The third child lived in Virginia. The couple told me they wanted to accomplish two things:

  1. They wanted an irrevocable trust that would protect assets from nursing home costs; and
  2. They wanted the surviving spouse and the children to avoid probate.

We discussed some of the issues that were involved when a large portion of their life savings were in their IRAs. The couple was serious about protecting what they had because one spouse had a parent that was spending a fortune right now on nursing home costs and private sitter costs. The other spouse that I was working with had seen parents lose a home and significant savings to nursing home costs.

We discussed all of the tax aspects of their estate legal program, including:

  • The income tax consequences of assets held in a trust;
  • The protection of the step-up in basis of appreciated assets at their death;
  • The likelihood that there will be no estate or inheritance tax when they die;
  • The income tax consequences of distributions from their traditional IRA and their Roth IRA.

We also discussed how they wanted to provide funds for their grandchildren's education and the best ways to accomplish that. We also discussed, at their request, how owning long term care insurance might fit into their overall legal plan to protect their estate for themselves and their children. They mentioned that they were already staring to look into long term care insurance possibilities with an insurance provider.

At the end of the discussion, I believe they felt that by discussing these issues with me and working toward an estate legal plan to protect their family, they have a plan in place that gives them peace of mind, knowing that they have done what they could to protect their estate.