Paul Rabalais estate planning

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

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
Phone: (225) 329-2450

Child Dies Before Parent: What Happens To Estate?

Typically toward the end of the estate planning conversation, a client asks the question, "What would happen to my estate if my child dies before me?"

There are a few different components to this question. First, if a Louisiana resident dies with no legal planning in place (no last will means they died "intestate"), then state law determines who gets what. For example, let's say Dad dies. Two years earlier, Daughter died. Daughter left three children. If Dad died intestate, Daughter's three children would inherit the portion that would have gone to Daughter. Daughter's three children "represent" their mother in Dad's Succession.

Now, let's say, Dad left a Will or a Trust when Dad died. Now, the estate planning legal documents Dad signed control what happens to Dad's estate. Most estate planning documents have, as a default provision, a statement that says that if a child predeceases a parent, then the child's share will go the child's children. However, when a person is putting an estate legal program in place, they can direct their estate as they wish. Many parents express that if their child predeceases, they do not want the child's share to go to the child's spouse or the child's step-children. Or some grandparents have grandchildren that have substance abuse problems and the grandparents do not want to dump an inheritance into a grandchild's lap. So, it's important to address these contingencies as you create your estate legal program.

What you can't do, however, is leave an inheritance to a child and then direct what happens to that inheritance when the child later dies. Once you leave an inheritance to someone (such as, a child), the inheritance belongs to the person who you left it to. You cannot control what they do with it. However, by leaving an inheritance in trust you may be able to exercise more control over what happens to the inherited assets after you pass away.

Gaining Access To Funds Payable To An Estate

I've been working with a family in order to gain access to funds that were payable to "Estate of Dad."

Dad died leaving a last will and testament. He named his two children as the co-executors and the equal heirs. Dad only left two assets in his name, a retirement account and a bank account. There were no designated beneficiaries named on the retirement account, and the bank froze the bank account that was in Dad's name only. The family could not gain access to any of these funds.

The steps one must go through to get access to these funds are as follows:

(1) Co-Executors Confirmed. We will prepare the necessary court pleadings to get the two children confirmed as the Independent Co-Executors. This paperwork, along with the signed original of Dad's last will gets filed at the parish courthouse. The pleadings make their way to a judge's office, and, if approved, the judge signs the court order confirming the children as the Independent Co-Executors. Then, the clerk of court will issue "Letters of Independent Co-Executorship,"

(2) Open Estate Account. The children must use these "Letters of Independent Co-Executorship" to open an estate account at a financial institution. The institution holding the retirement account funds, and the bank where the frozen account is held, will issue checks payable to "Estate of Dad." The co-executors will then deposit these checks into the Estate account.

So, in this matter, the simplest way to get access to Estate funds was to open the Succession, get the Executors confirmed, open an estate account, and then deposit estate funds in the estate account.

Sure , there is more to a Succession, such as preparing and filing the Detailed Descriptive List of Assets and Liabilities, and Petitioning for the Judgment of Possession, but it's these first steps that allows families access to funds payable to an Estate.

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.

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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

Is Cash in a Safety Deposit Box Protected From Louisiana Nursing Home Medicaid?

More than once someone, in my office, has said something like the following to me: "Mr. Rabalais, I'm not worried about losing my money if I go into a nursing home. I'm going to cash in all my accounts and put all my money in a safety deposit box and hide it from the government that way."

Oh brother!

I don't like working with people like that who think they can beat the  system no matter what the rules say. But in case you are wondering, here is what the Louisiana Medicaid Eligibility Manual says about assets in a safe deposit box, it says, in pertinent part:

"Count the value of any countable resource in a safety deposit box. Advise the applicant/enrollee not to open the box until the contents can be verified. Contents of a safety deposit box may be verifited by: a written verification from the financial institution, or sworn statements from third parties who view the contents. Note: The applicant/enorollee's statement of the contents is not acceptable verification/documentation."

Plan ahead to avoid a nursing home spending spree fiasco. For more relevant info on protecting your estate, go to our facebook page and Like it - Rabalais Estate Planning, LLC

Louisiana Family Supportive After Parent Dies Intestate Requiring Probate

I was contacted by a family recently that had a number of estate planning and administration issues that needed to be addressed.

Mom had died unexpectedly a few years ago. Mom died intestate - which means she had no Will or other estate planning legal documents in place when she died. Mom and Dad had accumulated a fairly significant estate by the time she passed away - including homes, mutual funds, stock, bank accounts, vehicles, and other assets.

Dad is planning on getting married again. Normally, this causes problems between the children of the first marriage and the new step-mom - but not here.

The children were super-supportive of their father. They said, "Look Dad, you raised us, bought us cars, paid for our college education, and you've been a great father. You and Mom don't owe us anything. We want you to have it."

Now that's support from children back to their father! The children realized that they could kick Dad out of his house on the day that he marries Step-Mom - but the kids are better than that.

But we still have legal work to take care of. We will complete Mom's Succession. And then after that, the kids will sign legal documents donating their share of their inheritance from Mom back to Dad. Dad will wind up being the 100% owner of everything. 

Dad is now establishing a new legal plan to support his new wife and his children the right way, and making things easy for them to inherit in the future.

If you live in Louisiana, and are in a situation like this, and would like to find out how easy it is to get all of this straight (and how much of a mess it will be if you don't address it), give my office a call at 866-491-3884, and we'll have a discussion about the easiest way to get all of it straight.