Louisiana estate planning

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

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

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

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

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

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

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

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

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

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

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

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

2018 Gift and Estate Tax Rules, Limits, & Analysis

There's been a big change to the estate and gift tax rules for 2018. We'll focus on the Louisiana components first, and then the federal components.

The Louisiana aspects to gift and estate tax are pretty simple. Louisiana no longer has either a state gift tax, or a state estate tax. While Louisiana, at one point, assessed a state inheritance tax when Louisiana residents died, that Louisiana inheritance tax no longer exists.

From a federal standpoint, the gift tax present interest annual exclusion increased from $14,000 to $15,000 in 2018. It gets adjusted every few years for inflation, but in $1,000 increments. The confusion comes in when people make gifts that in excess of the $15,000 present interest annual exclusion. Some people mistakenly believe that if a gift is made in excess of this amount, that someone owes tax. This belief is wrong. By making a gift in excess of $15,000 to someone in 2018, the person making the gift will simply be using some of their $11.2 million estate tax exemption - which they can use either during their lifetime or at their death. So, there will be no gift tax due (unless the gifted amounts exceed $11.2 million). 

People refer to the gift in excess of $15,000 as a "taxable gift." But that is a misnomer. I believe the gift in excess of $15,000 should be referred to as a "Reportable Gift," because in almost every instance, no tax is due by anyone.

The federal exemption for 2018 skyrocketed from the 2017 amount of $5.49 million to $11.2 million. However, for your rich folk, the exemption is scheduled to revert back in 2025 to about $6 million (hard to predict because of the inflation adjustment).  

Bottom line: almost no one (except for the uber-wealthy) need to worry about paying either gift or estate tax. The public mistakenly think that taxes are due when a gift exceeds $15,000 (the present interest annual exclusion), but those thoughts are wrong. The gift in excess of $15,000 should be referred to as a "Reportable Gift" instead of a "Taxable Gift," which infers that tax is due as a result of the gift.

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 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

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?

Louisiana Family Avoids Estate Tax and Simplifies Settling Their Estates

Was working with a family recently. Their child had searched online for information about how Louisiana families can establish an estate legal program to avoid estate tax and other government interferences.

Over the years, the family worked hard to establish and maintain a successful business. The parents owned the majority of the stock of the S Corporation, and their child owned a smaller number of shares.

The business had been informally valued recently and it appears it is likely there will be estate tax when the parents die. In short, a married couple can pass along about $11 million to their heirs free from the 40% federal estate tax.

The couple asked me how the tax would get calculated when they die. They asked, "Mr. Rabalais, will the government swoop in and take over all of our business records and business assets immediately after we die so that the estate tax can be calculated by the Internal Revenue Service?"

I said, "No, it doesn't work quite that way. After you die, your child will be responsible for filing a federal estate tax return within nine months of the date of your death. Your son will hire someone like me to help him comply with all of the estate tax reporting rules. Your son will hire an appraiser to appraise the value of your business and your property. All of these appraisals will be attached to the estate tax return. If tax is owed, your child will use your assets to pay the tax. The IRS audits every estate tax return. If they feel your child did an adequate job reporting all of the assets correctly, they will accept the return as filed. If the IRS wants to challenge the valuations or other information, they have the right to do so."

So, we're starting a plan now to help this family arrange their estate so that, with the actions that they take today and in the next several years, they will be reducing the value of their estate that will be subject to the 40% estate tax.

In addition to federal estate tax avoidance, we are also putting an estate legal program in place so that it will be simple for the surviving spouse, and the child, to inherit the assets without having to go through the court-supervised and government-controlled Succession procedure (also called "Probate") when they die.

Gretna, Louisiana Estate Planning Audience Worried About Losing Assets To Nursing Home Expenses

Gave an estate planning presentation to a great group of folks in Gretna today. When each of the individuals walked in, I asked them what they were hoping to learn during the presentation. The responses were all very similar, although each response was based on a particular background or family experience. Some of the responses were as follows:

  • Husband has dementia. One woman stated that her husband has dementia and she was worried that she would have to put him in the nursing home in the future, which would cause them to lose their life savings, and ultimately, lose their home. She said most of their net worth was in their home and she was hoping to be able to leave the home to their children.
  • Couple Wants to Avoid Leaving It to the Government. Another Gretna couple said our information is exactly what they were looking for. They have worked hard and had saved. They want to see their hard-earned estate go to their children instead of to the government or the nursing home. They said that one of their two children was an attorney - I told them that I would not hold that against them. :)
  • Couple owns rental real estate. One couple owns several doubles in Jefferson Parish. The husband, in his late 60's, had seen other family members deplete their estate due to nursing home costs. They were concerned about protecting their property and their savings for their one child. We discussed the capital gains tax problems associated with donating the properties to their son right now.
  • Husband Died Two Years Ago. One woman in attendance lost her husband two years ago and had not started on his Succession. She is getting to a point where she can't manage the home and is considering selling it and moving into something smaller. There are family issues that may make completing the probate difficult, if not impossible. Perhaps we can help her.
  • Future Executor Worried. One gentleman said he was named as the executor of his elderly parent's Will, but prior to attending my presentation, thought he would be able to go to the bank and brokerage firm after his parent dies with the Will and get immediate access to funds for immediate distribution to his many siblings. Now he is a little worried because the sibling relationships are less than rosey, and he anticipates many problems when his parent dies and he tries to fulfill his duties as executor.

All in all, it was a great crowd in Gretna today. All were worried about the various potential interferences that could mess up their trying to leave their estate to their children. I look forward to the opportunity to work with many of these folks and help them establish a Louisiana estate planning program out of our Metairie office so that they can pursue their senior years without worry that there will be difficult estate issues when they die.

If you live in Louisiana, and would like to discuss how an estate legal program might help your family protect 100% of your estate, give us a call at 866-491-3884, and let's set up a time to chat about how easy it is to get your estate legal affairs in order.

 

Husband's Small Estate Can Do A Huge Favor to Wife's Family - the Estate Tax Portability Election

Blended families are common these days primarily because the divorce rate is high, and since people are living longer, it's common for someone to lose their spouse and then remarry in their 60's, 70's or 80's.

Many blended family situations are such that each spouse has their own children. It's common for the couple to establish a Marriage Contract (also referred to as pre-nup, pre-nuptial agreement, or separate property contract.

I've been working with a blended family in recent months that has strong ties to the Baton Rouge, New Orleans, and Lafayette communities. The wife has a very large estate (let's say, $10 million) and the husband has a much smaller estate (let's say $1 million). Each of them has their estate legal program set up so that when each spouse dies, their respective estates will go to their respective children. The problem is that the wife's estate, at $10 million, faces perhaps a couple of million dollars or more in estate tax when she dies (depending on value and tax law at time of death).

The couple is predicting that the husband will die first - he is older and is not in as good health as the wife. He'll be leaving everything to his four adult children. His wife will not be involved in his estate settlement. There will no federal estate tax return due after the husband dies because his estate - at $1 million - will be less than the applicable exemption ($5.45 million for deaths in 2016).

Here's the kicker: when the husband dies, there will obviously be no estate tax because his estate is relatively small compared to the estate tax exemption. But if the husband's estate, after he dies, files an estate tax return and makes the portability election, then the wife's estate, when she dies, will not only have her $5.45 million estate tax exemption, but she will also get to use the husband's unused exemption. So, let's say the husband does not use $4.45 million of his exemption and his estate makes the portability election on his estate tax return (IRS Form 706), then the wife, at her subsequent death, could exclude $9.9 million of her estate from the 40% tax.

Bottom line - when the husband dies, the wife and her children should be REALLY nice to the husband's family (particularly his executor) in order to sweet talk him into filing an estate tax return and making the portability election. In fact, the wife should offer to pay for the accounting and legal work necessary to get that done. It will be a small price to pay to recognize as much as $2 million of tax savings at the subsequent wife's death.

If you are in a marital situation and one spouse has an estate that is much larger than the other spouse, you may want to have a discussion with someone like myself who can help you set up a Louisiana estate legal program to minimize or avoid the tax that both families may have to incur later.

Whether To Leave Percentages or Specific Amounts To Your Heirs or Beneficiaries

Was working with a family today from Metairie who wanted to leave a bequest to many difference grandchildren, great-grandchildren, and even certain step=grandchildren. They also wanted to leave the bulk of what they had to their five children when they died.

They asked me whether they should leave a specific amount to these descendants who were at least two generations below them (say, for example, $25,000 to each one), and leave the rest of their estate to be divided equally among their five children. We discussed, however, the alternative of leaving a large portion (say, for example, 75% to be divided equally among their five children, and leaving the remaining 25% to be divided equally among the specific grandchildren and great-grandchildren that they wanted to benefit.

These kinds of estate planning decisions can be tricky. Generally, if someone wants to leave others a small amount, designed primarily to acknowledge the recipient, we usually see them leave a specific dollar amount to those beneficiaries or heirs. This is, perhaps, a simpler way to acknowledge a recipient. It gets more complicated when you leave each of several people 1% or 2% of your estate - the recipient might want to review accountings to make sure they are getting the correct amount. But if you leave someone a fixed amount like $10,000, it does not matter how large the overall estate is, the recipient will get his $10,000, whether the overall estate totals $300,000 or $3,000,000.

If you are wanting to leave each of several people a significant amount of your estate, then perhaps it's easier to leave each of them a percentage of the overall estate. For example, if you want to leave a substantial bequest to your two children and your three grandchildren, then perhaps you would leave 20% of your estate to each of the five. If, for example, you leave $200,000 to each of your three grandchildren, and leave the balance to be split among your two children, and if your estate does not exceed $600,000 when you die, then your children will get nothing because the specific bequests ate up the entire estate.

Your decision to leave specific dollar bequests versus a percentage of the estate is both important and tricky. Your estate will likely fluctuate in value from the time you put your estate planning legal program in place, until the time you pass away and your program plays out. This is a good reason to review your estate planning program every few years and, if necessary, work with your estate planning attorney to keep it current.