estate planning Baton Rouge

Lafayette,Louisiana Family Benefits From Dad's Estate and Medicaid Planning

I've been working with a Lafayette area family lately. Dad has his home, his life savings, and a couple of other pieces of property, and he wants to make sure his kids get it when he dies. His biggest threats to his children, as he sees it, are:

  1. Losing the assets due to a long-term care nursing home stay;
  2. Taxes; and
  3. Probate

A large part of his life savings is tucked away in his Individual Retirement Account (IRA). He also has investments held in an account that is not an IRA, and he has some money in bank accounts.

He realized that his IRA is threatened. He knows that any distributions from the IRA during his lifetime or after he dies will be subject to income tax to the recipient of the distribution. He was questioning whether taking required minimum distributions each year was the smartest way to handle his IRA. Here's what he said:

"If I just keep taking my required distributions, then I will pay tax on those distributions and the remainder of my IRA will continue to grow tax-deferred. All of the future growth will be ordinary income to whoever receives a distribution and those distributions in the future could be taxes at a rate as high as 40%, particularly if they go to my kids. Plus, if I go to a nursing home, I will be forced to take large distributions, pay the income tax, and then spend the remaining amounts on my nursing home expenses."

Then he asked:

"Wouldn't it be better if I took larger distributions that the required distributions, pay the tax, and then place the after-tax proceeds in a special trust account where it will be protected from my future nursing home expenses? Oh, and since the trust is a Grantor Trust, any future appreciation of my investments after I take it out of the IRA will passtax-free to my kids due to the step-up in basis that they will enjoy when they sell the assets after my death?"

His analyses appears to make a lot of sense. Most people are encouraged to keep every penny that they can inside their IRA. I'm not saying that's wrong every time, but as long as the investments grow inside the IRA, then a big chunk of each distribution will go the IRS. If the IRA goes ahead and takes distributions faster than required, and pays the tax on those distributions, then future appreciation would escape taxation due to the step-up in basis. Plus, if the IRA owner takes distributions and places those funds into the right kind of trust, then there is the added benefit of being protected from future nursing home costs.

Anyone who has an IRA and is concerned about future taxes and about losing the IRA to nursing home expenses, should have a conversation with an estate planning attorney who understands not only the estate tax, but the income tax and capital gains tax consequences of taking minimum distributions versus taking distributions larger than the minimum required amount.

Give us a call at 866-491-3884 to start a conversation about how to protect your IRA from the government. Don't wait another day. Every day that you wait could be costing you and your family!!!

One Ceremony Saves Monroe, Louisiana Family $2 Million of Federal Estate Tax

I am working to set up an estate planning program for a really nice couple from Monroe, Louisiana. They had four main concerns, and one of them was making sure they avoided whatever taxes they could avoid as they have an estate plan which transitions their assets to the next generation after both of them die.

Although unusual, the couple mentioned that they were not married. All of the assets were in the gentleman's name because there were some lawsuit scares for the woman many years ago - but all of those lawsuit scares are behind them.

The gentleman had an estate that was in excess of the $5.45 million estate tax exemption. The woman had almost nothing. When they brought up the fact that they were not married, I gave them some advice regarding future estate tax that their heirs will be burdened with. I said, "You know, because you are not married and because all of the assets are owned by only one of you, then you will only be able to exempt $5.45 million from the 40% federal estate tax. But if you get married, and you have the right legal program in place, and you make the right tax elections after one of you dies, you will be able to exempt $10.9 million of assets from the 40% federal estate tax."

By the time they had left my office, they had already scheduled their wedding plans.

The estate tax laws can be more favorable to married couples than to two single individuals, due to the federal estate tax unlimited marital deduction and the portability election. I'm not crazy about having estate tax laws dictate whether a couple should get married, but if simply by tying the knot a couple or a family can save as much as $2,000,000 of estate tax, it may be worth it if you're getting married for the right reasons - not just tax planning.

If you live in Louisiana, whether in Baton Rouge, Lafayette, Metairie, Monroe, Shreveport, Lake Charles, or Covington/Mandeville, and you want to have an estate planning legal program in place that will avoid federal estate tax and make it easy for the right heirs to inherit the right way, give us a call at 866-491-3884, and we'll start a conversation about how simple and important it is to have the right estate legal plan in place to protect your estate for your heirs and from the IRS and other taxing authorities.