Northshore estate planning

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
website: www.RabalaisEstatePlanning.com