Forced Heirship

Collation Explained - Louisiana Estate Planning Law

When someone asks me what "Collation" means, it's typically because they've seen the word referenced in a last will and testament, and they don't know what it means.

This post describes a little history and current application of Louisiana collation law.

Back in the pre-1990's, there was a presumption in Louisiana estate law that parents were supposed to, from an inheritance standpoint, treat their children equally. If a parent made a gift to one child during the parent's lifetime, collation laws required that gift to be considered as an advance on that child's inheritance. 

So, back in the pre-1990's, parents were permitted, in their last will and testament, to dispense their lifetime gifts from collation so that lifetime gifts would not be considered an advance on a child's inheritance.

Then, in the 1990's the Louisiana Collation law changed significantly in a way that reduces the scope and application of collation by limiting the right to demand collation to children who qualify as forced heirs, and collation only applies with respect to gifts made within three years prior to the parent's death.

Now, under collation law, if a child is 24 and not otherwise disabled,  he or she is not permitted to demand collation. And a grandchild is not permitted to demand collation, even if he or she qualifies as a forced heir.

Nonetheless, many attorneys still include a provision in their client's wills stating, in effect, that the client's lifetime gifts are exempt from collation.

I haven't seen or heard anyone around our office discuss a potential collation claim in decades. Collation claims just don't come up much any more due to its limited scope. I suppose, however, it does not hurt to keep the "dispense from collation" provision in Louisiana last wills, even though it causes some confusion because clients have no idea what it means. 

However, now with this post, you know!

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

Louisiana Forced Heirship Law: Four Key Concepts

Louisiana is the only state that has these unique forced heirship laws. Basically, the law provides that certain children must be left an inheritance. Let's take a look at some of these provisions.

Definition. There are, in general, two definitions of a forced heir. A forced heir is a child who, at the time of your death, is 23 years of age or younger. A forced heir is also defined as a child of any age who, because of mental incapacity or physical infirmity, are permanently incapable of taking care of their persons or administering their estates at the time of your death. Note that I'm generalizing here, and there are exceptions and further clarifications in the law. So, make sure you see an estate planning attorney if these circumstances apply to you.

Amount a Forced Heir is entitled to. Again, exceptions apply here. But generally, if you have one forced heir, that forced heir is entitled to 1/4 of your estate. If you leave behind two or more forced heirs, they must, collectively, share half of your estate. Life insurance, 401(k) accounts, and IRAs are not counted for purposes of this calculation.

Burdening the Legitime. You can arrange your estate, if you have one or more forced heirs, so they do not get their forced portion until both you and your spouse die. You can leave an income interest in trust for your spouse, or you can leave your spouse usufruct of the forced portion. Again, exceptions apply so work with an estate planning attorney.

Disinherison. Even if you leave a forced heir, you can disinherit them (leave them nothing) of they fit under one of the eight just causes for disinherison. The one used most often is when a child, after reaching age 18 and knowing how to contact the parent, has failed to communicate with the parent without just cause for a period of two years, unless the child was on active duty in any of the military forces of the United States at the time.

My final warning about forced heirship is that our rules can be tricky. There is much more to it than what was described here. And since it only applies in Louisiana, none of the national articles or publications will help you.

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.

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.

Estate Planning When You No Longer Communicate With Child

I was working with a surviving wife who lost her husband a couple of years ago. The husband never took any time to put any kind of estate legal program in place. The husband had no communication with a child that he had from a previous marriage.

After her husband died, the wife told me she wanted to sell her home and relocate. I told her she would have to get her former step-son's written permission to be the independent administrator of her husband's Succession. She said, "That ain't gonna happen. He is not going to agree to anything unless i give him money."

We talked about how, as the Administrator of her husband's Succession, she would have to go through a lengthy process to, first, be appointed as the Administrator, and then even more lengthy, do the newspaper advertising and other judicially approved  things that will be necessary to sell the house. She realized it would be months, if not years, before she could sell the house and relocate.

All this could have been made much simpler if, prior to his death, the husband would have engaged in some meaningful estate planning to make settling his estate easier for his wife and other children. Now she is faced with this former step-son controlling many of her future moves.

Take action. Your loved ones will thank you for it.

Paul Rabalais
www.RabalaisEstatePlanning.com
Law offices: All over south Louisiana
Phone: 866-491-3884

Couple From Alexandria, Louisiana Has Estate Plan To Protect Youngest Child

I've been working on an estate legal program for a couple from central Louisiana. It's a "his, hers, and ours" scenario. The wife has several children from prior marriages. The husband has one child of his own. After they married, they had another child.  They mentioned several times that they were not very close with the older children, and that many of the older children had a larger estate than this couple had.

Their main concern was for their youngest child - that they had together. The wife was concerned that they may be forced to leave an inheritance to the older children due to Louisiana's forced heirship laws, but we discussed that since the older children were older than 23 years of age, she was not forced to leave the older children an inheritance. They realized that the youngest child was a forced heir, but the fact that the youngest child was a forced heir was not an issue because they would leave the bulk of their estate for the benefit of this youngest child.

They wanted an arrangement where the surviving spouse would completely control everything. But after both the husband and the wife pass away, they want their estate to be for the benefit of their youngest child. This child, a daughter, while responsible, would not be prepared to inherit an estate in a lump sum. But the couple had no family member or no one else that they could "trust" enough to be the Trustee of their daughter's trust after the couple passes.

After discussing the pros and cons of naming a corporate trustee to handle things for the young child (if the child happens to still be young when the couple dies). They selected the trust department of one of the national banks that they use to be the trustee.

Now the couple knows that if they pass away before their child completes all of her graduate and post-graduate education, then their estate will be managed by professionals and used for the right reasons until the child is an adult and has the maturity to handle the inheritance prudently.

The couple now knows that they have taken the necessary legal action to set up an estate legal program to protect the surviving of them from children or other who may want to cause a fuss, and they've provided for the financial well-being of their child who will need a head start on life if her elderly parents pass away unexpectedly in the next several years.

Married Couple Doesn't Want Surviving Spouse To Have To Get Children's Permission To Sell The Home

I met with a couple yesterday from Assumption Parish. They had children that were young adults but the children were still forced heirs. Their number one goal was to make legal and financial and estate matters simple for the surviving spouse after the first spouse dies. They do not want to have to get permission from the children if the surviving spouse wants to sell the house, a vehicle, or stock that they own.

They realized that if they put no legal plan in place, then when one spouse died, the surviving spouse would be at the mercy of the children if the surviving spouse wanted to sell the home or other assets they had.

We put a plan in place so that when one spouse dies, the surviving spouse can continue to control everything - the children do not need to be involved at that point - and the surviving spouse will remain in control of everything. Yet, the children's forced heirship rights will be protected in compliance with the Louisiana forced heirship laws.

One of the big reasons married couples put an estate legal plan in place is to make things simple for their surviving spouse. If you want to do the same for your spouse, simple email me at paul@rabalaisestateplanning.com, and tell me a little about your circumstances and what your estate goals are. Then, if appropriate, we'll all get together to chat about what an estate legal program might look like.

Louisiana Couple With Young Adult Children Can't Leave Everything To Each Other

I met with a middle-aged couple yesterday from Prairieville. They wanted to get their legal affiars in order. They said that getting their legal affairs in order had been on their "to-do list" for a few years, and they were glad they were now getting it taken care of.

They were wanting to keep things as simple for themselves as possible. They indicated that they each wanted Wills leaving everything to the surviving spouse, and then after both spouses died, they wanted everything to go equally to their three adult children, who were 18, 19. and 21.

I let them know that, at least for now, they could not leave everything to each other. Since they still had children who were forced heirs (age 23 or younger), they are forced by Louisiana law to leave their children an inheritance.

I told them they could satisfy these forced heirship rules by leaving their surviving spouse the usufruct of their estate, and naming the three children as the naked owners. Under this scenario, protections would be in place after the first spouse dies to ensure that when the surviving spouse dies, the children of the first spouse to die will receive the inheritance from the first spouse to die.

Example. Mom dies and leaves the usufruct of her estate to Dad, and Mom's Will lists the three children as the naked owners. Mom dies. Years later, Dad remarries New Wife and changes his Will so that his estate goes to New Wife. Since Mom left the usufruct of her estate to Dad and names Mom's children as the naked owners, then when Dad later dies, Mom's estate must go to the children before any of Dad's estate can go to New Wife.

I've written quite a bit more about this in my book, "Estate Planning in Louisiana, A Layman's Guide," but if you have children who are 23 or younger, realize you will not be permitted to leave your estate entirely, in outright ownership, to your spouse. You must satisfy the Louisiana forced heirship rules.