Keep Property in Family

How To Keep Your Sons-In-Law and Daughters-In-Law Out of Your Estate

It's common for parents to want to keep their sons-in-law and daughters-in law out of their estate, for a variety of reasons. Common reasons include the fact that the in-law spends too much money; the in-law has their own kids; the in-law will inherit from their own parents and grandparents; some parents want to keep everything in the "bloodlines" because they inherited from parents and grandparents; others just don't like their in-laws; and others fear that their children will get divorced in the future and lose their inheritance.

Parents have several options when establishing an estate legal program. One option is simply leave the inheritance to the child - outright. Some parents reason that an inheritance is the separate property of the child so that should take care of it. However, inheritances that children receive are often, either intentionally or unintentionally, commingled with community property causing the inheritance to lose its separate property status.

A second option parents have is to leave their child's inheritance to a trust for the benefit of the child. If the parents name the child as the trustee, the child's spouse could exert influence over the child and force the child to take excessive distributions from the trust. But some parents tell me, "Let's leave it to a trust for our child and name our child as the trustee. If our child screws it up, so be it. We did what we could do to try to protect him without taking away his access to his inheritance."

A third option is to leave your child's inheritance to a trust, but name a 3rd party as the trustee of the trust - in essence restricting your child's access to his or her inheritance. By restricting your child's access to the trust, your are restricting your child's spouse from influencing your child to access the trust. You may even wish to name your child's children as the principal beneficiaries of the trust so that when your child later passes away, remaining trust assets would stay in the bloodlines benefiting your grandchildren. Your child's withdrawal or distribution rights become key components to this program.

There are many factors that play into how you leave an inheritance to your children. You must factor in the Louisiana community property law, the Louisiana Trust Code, laws which state that fruits of separate property are community property, family law, marriage contract law, and laws allowing spouses to sign a Declaration reserving the fruits of separate property as separate property.

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

Disclaimer or Renunciation an Effective Post-Death Estate Planning Tool

Sometimes, believe it or not, it makes good tax or legal sense to formally refuse (also known as "disclaim" or "renounce") an inheritance.

Example: Dad dies and leaves assets to Mom. Mom doesn't need the assets and she wants to see the children enjoy their inheritance from their father. Mom might disclaim the inheritance.

Example: Mom dies leaving her estate to her two children. One child decides that he does not need the inheritance and decides to renounce and allow (due to Mom's governing documents) child's children to receive the inheritance. Disclaiming prevents the child from having to accept the inheritance and then give it away pursuant to federal gift tax annual exclusion limits.

Example: A Traditional IRA owner dies. The primary beneficiary decides that it makes more tax sense to disclaim her portion of the IRA and allow the IRA to pass along to the contingent beneficiaries because the taxable required distributions will be smaller to the contingent beneficiaries.

A "Disclaimer" is generally a federal tax term which allows people to formally refuse an inheritance. It prevents someone from having to accept an inheritance, and then donate it away. Particular disclaimer tax rules must be followed, including the requirement that the disclaimer be in writing, within nine months of death, and the disclaimant cannot accept any of the benefits of the disclaimed assets.

Renunciation is the Louisiana term for this. If a renunciation is to take place, it must do so in that window of opportunity after the date of death but before the disclaimant receives any assets or other benefit from an inheritance.

Disclaimer/Renunciation planning should be considered in many estate planning programs, both the post-death opportunities should be explored, and the incorporation of written disclaimer provisions in your governing will or trust legal documents as you put your estate planning legal program into effect.

One area where some get confused is that you cannot renounce an inheritance to get out of paying your debts or to get out of paying for the nursing home. Your creditor may accept your succession rights if you renounce them to the prejudice of your creditor's rights. And the Louisiana Long Term Care Medicaid Manual treats a renunciation as if you accepted the inheritance and then gave it away - triggering penalties for uncompensated transfers of resources.

Again, really important that you work with the right people to set things up the right way, the first time.

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

Four Key Medicaid Rules Regarding Bank Accounts as Countable Resources

Many indviduals, couples, and families are concerned that a nursing home stay will cause them to deplete their life savnigs, and force them to lose their home to the State of Louisiana when they die due to the State's Estate Recovery Rights.

While it is important to take advantage of legal strategies to protect your estate from nursing home poverty at least five years before you wind up in a nursing home, it's also important to understand what you can and cannot own at the time one goes into a nursing home and applies for Louisiana Long Term Care Medicaid.

A single person can have no more than $2,000 of Countable Resources when they apply for Louisiana Long Term Care Medicaid. Bank accounts are a Countable Resource. This post takes a closer look at four key Medicaid rules regarding bank accounts as a Countable Resource for purposes of Louisiana Long Term Care Medicaid.

(1) 1st Day of Month. Medicaid counts the balance shown by your bank for the first moment of the first day of the month. Be prepared to furnish banking records.

(2) Encumbrances Deducted From Bank Balance. If you have written a check for a legal obligation, and that check has not cleared by the first moment of the first day of the month, the encumbrance may be deducted from the actual bank balance.

(3) Unrestricted Access ("or") Accounts. The Medicaid applicant is presumed to be the owner of all funds held in an "or" account.

(4) Rebutting the Presumption for an "or" Account. If the Medicaid applicant is not the owner of funds in an "or" account, the applicant can rebut the presumption of ownership by providing written and corroborating statements regarding ownership, withdrawals, and deposits, along with a change in account title or the establishment of a new account with only the Medicaid applicant's funds.

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

Prohibited Substitution in Louisiana Last Will is Null

The Prohibited Substitution estate planning rules in Louisiana are a trap for the unwary. When someone writes a Louisiana last will and testament, or a trust, in a way that it contains a prohibited substitution, then the bequest is null.

So, what is a prohibited substitution? Well, here's an example of a provision in a Will that would be interpreted as a prohibited substitution, "I leave ownership of X to Person 1. I require that Person 1 preserve X and, when Person 1 dies, I require that Person 1 leave ownership of X to Person 2."

You cannot donate or leave something in full ownership to one person with a charge to preserve it and deliver it to a second person at the death of the first person. You would be depriving the first person from the power of testation.

A prohibited substitution might be something that I'd see in an olographic testament. Some people attempt to write their own wills in their own handwriting, but they mess up the provisions of the Will. People in Louisiana sometimes argue that they can write their own valid will, but they often fail to realize that the wording that they put in their will can make their loved one's lives miserable.

A prohibited substitution is null - it's as if it was never written. The bequest to the first person is not even valid.

There are a couple of alternative you can use if you want to leave an asset for the benefit of someone, and then when that someone dies, have the asset pass along to another someone. One way to do this is to use a trust - check with your estate planning attorney to help you do this the right way. Another option that might be feasible is to leave usufruct of an asset to someone, and name the naked owner to receive the asset at the termination of the usufruct. Again, check with your estate planning attorney to make sure that you understand the pros and cons of leaving things in trust or in usufruct.

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

Deceased Owned Property in Many Parishes: How To Transfer To Heirs in a Succession

This post describes how the real estate of a deceased person, who owned property in multiple Louisiana parishes, gets transferred the right way to the heirs.

We recently started working on a Succession. The deceased lived in Jefferson parish but owned property in several different parishes. He didn't own property in Jefferson Parish, but he owned property in St. Tammany, Tangipahoa, Plaquemines, and St. Landry Parishes. The daughter, who was named the executor of her father's Will, thought she was going to have to travel all around the state to register the children as the new owner of all of their father's property.

I explained the procedure for getting the property transferred as follows:

(1) Succession Opened. The proceeding to open a Succession after someone dies must be brought in the district court of the parish where the deceased was domiciled at the time of his death. In this matter, the deceased was domiciled in Jefferson Parish, even though he did not own a home or other real estate in Jefferson Parish. All court pleadings, petitions, Lists of Assets and Debts, court orders, and all other court documents of the Succession will be filed in the Jefferson Parish Succession Suit record.

(2) Judgment of Possession. At the conclusion of the Succession, the district court judge in Jefferson Parish will sign a court order that we prepare called a Judgment of Possession. We will ensure that all of the various legal descriptions of all of the deceased's different properties around the state are listed on this Judgment of Possession.

(2) Certified Copies of JOP. Once signed, we will request that the clerk of court of Jefferson Parish issue multiple certified copies of this Judgment of Possession (JOP).

(3) Record JOP in Parishes. We will record a certified copy of the JOP in the conveyance records in each parish where the deceased owned real estate. This will show all third parties and title examiners that ownership has been transferred from the deceased to the heirs (or, since there was a Last Will, to the legatees (children)).

In this matter, the deceased also owned real estate in Mississippi. I told the family that the Louisiana Succession would not transfer the Mississippi property. The family must hire another law firm in Mississippi to go through the ancillary probate in Mississippi to transfer the Mississippi property from the deceased to the heirs.

Many people who have property in multiple states transfer those multiple properties to one Living Trust so that no probate proceedings are necessary after the death of the Trust Maker.

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

Transfer on Death (TOD) and Joint Tenants with Rights of Survivorship (JTWROS) Designations Not Recognized in Louisiana

Many Louisiana residents get confused because they are under the assumption that they can name beneficiaries on their non-retirement accounts at their investment company - but they can't.

Example. Mom and Dad have three accounts at the investment company. Dad owns a traditional IRA. Mom owns a traditional IRA. And they have a joint investment account. They come into the law office to discuss how to leave assets to each other and their family outside of probate and they are convinced that they have named beneficiaries on all of their investment accounts. They later discover that they were only permitted to designate beneficiaries on their IRAs, but not their joint investment account. While other states permit probate avoidance designations on investment accounts, like Transfer on Death (TOD) and Joint Tenants With Rights of Survivorship (JTWROS), these designations are not recognized for Louisiana residents and investment companies do not permit their Louisiana customers to make these designations.

The following are a few examples of large investment companies that realize that the State of Louisiana does not recognize these designations, and thus, state so in their paperwork:

(1) Edward Jones Transfer on Death Agreement. "This Agreement shall not be valid and shall be of no effect in the State of Louisiana." https://www.edwardjones.com/images/transfer-on-death-agreement.pdf

(2) Merrill Lynch Joint Account Agreement. "JTWROS: Joint Tenancy with Right of Survivorship (not available for Louisiana residents)." https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMOL/Joint_Account_Tenancy_Agreement_-_1277.pdf

(3) Merrill Lynch TOD Agreement. Transfer On Death Accounts are available to Account Owners (defined below) who reside in all states within the United States (other than Louisiana)." https://olui2.fs.ml.com/publish/content/application/pdf/GWMOL/TransferOnDeathAgreement.pdf

(4) T Rowe Price TOD Agreement. "TOD is not recognized by the state of Louisiana, so we do not offer TOD for Louisiana residents." https://individual.troweprice.com/Retail/Shared/PDFs/todreg.pdf?src=AccountFinder

(5) Charles Schwab Designated Beneficiary Plan Agreement. "The Plan is not available in Louisiana." https://www.schwab.com/public/file/P-831898/APP10780-16-ADA_-_5_19_2017.pdf

A related issue affects Louisiana bank account holders who make a POD (Payable on Death) Designation. Louisiana banking laws simply release banks from liability to heirs or the estate for paying a beneficiary in accordance with the POD Designation. But if the account owner has different heirs pursuant to a Will or Trust, the POD beneficiary may be accountable to those funds they received.

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

The Double Step Up In Basis: Traditional Planning Makes Kids Pay Extra Capital Gains Tax

This describes how the traditional methods of estate planning for married couples causes children or other heirs and beneficiaries to pay extra capital gains tax due to the failure to take advantage of the double step-up in basis.

In the old days (about a decade ago), the emphasis on estate planning was always avoiding estate tax. Married couples would arrange their wills and trusts so that when the first spouse died, assets were left either in usufruct or to an irrevocable trust so that the assets of the first spouse to die would not be included, for estate tax purposes, in the estate of the surviving spouse. Assets were left to trusts commonly referred to as A/B trusts, credit shelter trusts, survivor's and family trusts, QTIP trusts, or bypass trusts. The goal was to, by leaving assets to an irrevocable trust at the death of the first spouse, those assets would escape estate taxation upon the death of the surviving spouse.

However, this planning method did not have the best capital gains tax result. In community property states, all of the community property would get a step up in basis upon the first spouse's death (to the value at the date of the first spouse's death), but only the assets that the surviving spouse owned would recognize another step up in basis when the surviving spouse died. The family was forfeiting another step up in basis.

Now, for almost all families, the fact that all the assets get lumped into the estate of the surviving spouse is irrelevant for federal estate tax purposes. Each estate can exempt $11.2 (for deaths in 2018) from the estate tax. And since new portability law allows the surviving spouse to use any part of the exemption that went unused by the first spouse to die, married couples can shield $22.4 million) from the estate tax. Simply put, estate tax is not an issue for most families.

So now, married couples should consider doing the opposite. They should consider arranging their affairs to that all marital assets get included in the estate of the surviving spouse. So long as the total is less than the estate tax exemptions, there will be no estate tax but the heirs will benefit from another step-up in basis when the surviving spouse dies. Then, if the heirs sell previously appreciated assets, there will be no tax to pay.

A simple way to include assets in the estate of the surviving spouse is to leave ownership of those assets to the surviving spouse (through a Last Will), Or if a married couple has a living trust to avoid probate, they can provide that the trust does not become irrevocable upon the death of the first spouse. However, if there is a blended family situation, or the couple is worried that the survivor may attempt to leave assets to a second spouse, or if the surviving spouse may need to qualify for Medicaid upon entering a nursing home, that couple may want to reconsider whether or not to put the surviving spouse in complete control of the marital assets.

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

Rules on an Irrevocable Trust and Nursing Home Medicaid

This post describes the regulations that exist regarding when assets in a trust are considered resources of someone who is applying for Long Term Care Medicaid.

Many Seniors are concerned about the cost of long term care, especially if it is necessary that they spend months or years in a skilled nursing facility.

Some Seniors explore getting assets out of their name timely to make themselves eligible for Medicaid. These same Seniors, however, are uncomfortable putting assets in their children's names for fear of losing control of the assets, and for fear of giving their children unwanted tax consequences.

Some people explore putting assets in trust for purposes of gaining future Long Term Care Medicaid eligibility. The Louisiana Long Term Care Medicaid Eligibility Manual (the "Manual") has specific rules regarding whether trust assets are considered a resource of the Medicaid applicant, rendering them ineligible for Medicaid benefits.

Regarding when the Medicaid applicant is a trustee of a trust, the Manual provides:

"Count the trust as a resource, regardless of whose funds were
originally deposited into the trust, if the applicant/enrollee:
 is the trustee, and
 has the legal right to:
- revoke the trust, and
- use the money for his own benefit."

Regarding when the Medicaid applicant is a Settlor of a trust, the Manual provides:

"Count the trust as a resource if the applicant/enrollee is the settlor
(created the trust) and:
 has the right to revoke it, and
 can use the funds for his own benefit"

Regarding when assets are not considered a resource and penalty periods apply to the transfer of the assets to a trust, the Manual provides:

Consider penalties under the transfer of resource policy (refer to
I-1670 Transfer of Resources For Less Than Fair Market Value) if
the applicant/enrollee:
 created the trust,
 does not have the right to revoke it, and
 cannot use the principal for his own benefit.

The traditional "avoid probate" revocable living trust clearly is a resource for a Medicaid applicant. Many people, however, create other trusts, and transfer assets to those trusts, which can enable a Senior to avoid the risks inherent in transferring assets during into children's names, while starting the five year penalty period and protecting assets from the nursing home spend down.

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

Estate Planning Case Study: Married Couple with $3m Estate

While every individual and couple that engages in estate planning has a different set of circumstances - no two are the same, the following is a case study of a Louisiana couple that has accumulated some wealth, never engaged in estate planning before, has two adult children who are late 20's and early 30s, and wants to keep control of their estate, provide for the surviving spouse, preserve it for the kids, keep estate matters simple, and avoid tax and government interference.

Let's say that the couple owns a home in Louisiana and a condo on the beach in another state. The husband worked for a chemical company, built up his 401(k), and when he retired, he rolled over his 401(k) into his traditional IRA. They have a joint brokerage account, vehicles, and a boat. Total estate is $3,000,000.

Some of the issues we would discuss include:

(1) First Spouse Dies. We would discuss how they want to leave their estate to their spouse when the first spouse dies. Do they want to leave their estate in full ownership to their spouse? Do they want to leave their estate in trust for their spouse so that assets get preserved for the children after the surviving spouse dies? Or, since they live in Louisiana, do they want to leave usufruct to their spouse, giving their spouse an obligation to account to the kids at the termination of the usufruct? Each of these options has varied estate tax, income tax, and capital gains tax consequences. Gotta do this right the first time before the first spouse dies.

(2) Surviving Spouse Dies. Do they want to leave assets to their children outright or in trust? Do any children have special needs, the inability to handle a lump sum inheritance, marital issues, or some other issues that would warrant leaving the inheritance to a child in trust? Lots to discuss here.

(3) Who's In Charge When You Can't? Who should be primary and backup for Trustee, Executor, Durable Power of Attorney, Health Care Power of Attorney, etc. We'd discuss the life-support machines decision.

(4) Taxes. We discuss the distribution rules for IRAs and retirement accounts and how those rules differ for spouse and non-spouses as beneficiaries. We'd discuss the step-up and double step-up in basis which can save the heirs a fortune when the sell your assets.

(5) Avoid Probate. We'd discuss the pros and cons of the "Will Based Plan" and the "Revocable Living Trust Based Plan," which can allow the surviving spouse and the children to avoid multiple probates in multiple states - given that the couple owns real estate in two states. The RLT Program would keep brokerage accounts from being frozen in the future.

Again, since very person is different - their objectives, their family, what they own, don't take this info and think that it perfectly applies to you. You need to work with the right estate planning attorney the first time so that problems don't surface later.

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

Children Donate Naked Ownership Interest Back To Surviving Parent

I've been working with a family recently. Dad passed away without a last will and testament ("intestate"). I explained to the family that since Dad died intestate, Dad's half of the community property would be inherited by Dad's children, subject to Mom's usufruct.

The children wanted to support Mom both emotionally and financially. The children wanted Mom to own everything so they asked me if they could donate their naked ownership interest back to Mom.  I told them that we would have to complete the Succession first in accordance with Louisiana law, and that Dad's half would have to go to the children, but then once the children were put "in possession" of the property, they could donate it back to Mom. Everyone felt good that Mom would own 100% of the property and the other Succession assets.

There were no gift or estate tax issues involved in the transaction since the estate tax exemption in 2018 is so high ($11.2 million). In fact, the children may benefit in the long run because when Mom dies many years from now, the children will benefit from the step-up in basis of Mom's entire estate as it passes to the children.

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.

How To Leave Inheritance To Minor Child or Young Adult

It never makes sense to leave an inheritance to a minor child in their own name, and it almost never makes sense to leave a lump sum inheritance to a young adult - say in their late teens or early 20's.

There are different vehicles to leave assets to a minor or young adult. Some people leave assets to others through a testamentary trust - a trust that is part of their last will and testament. Others create an "avoid probate" living trust and provide that the trust will continue after the parents pass away. Others set up life insurance trusts so that life insurance won't be dumped into the lap of a minor child or immature young adult.

One of the decisions you will make when you arrange an estate planning legal program for minors or young adults is: Who will be the trustee of the trust? Perhaps you have trusted family members or friends that you can designate as a trustee when you are gone - to oversee the inheritance for your minor children or young adult children. These would be what's referred to as an "individual trustee." Others of you may name a corporate trustee - a large bank or other financial institution that is set up to serve as a corporate trustee.

What often requires a great deal of discussion revolves around when your children can have access to the trust principal that is being held for them. There are unlimited options, but you could designate that your children receive their inheritance when they reach a certain age, say 25. Or, you could say that they get their inheritance in stages, say 1/3 at 25; 1/2 of what's left at 30; the rest at 35. Or, you could say that the trustee has discretion to determine the appropriate time to make principal distributions to your principal beneficiaries.

Note that even if you designate that the children cannot demand principal until a later date (let's say 30, for example), you can provide that distributions can be made earlier for the health, education, maintenance, and support of the principal beneficiary. This allows, for example, educational and health care expenses to be paid from the trust, even though the remaining principal will not be distributed until later.

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.

Who Should Be the Administrator of a Louisiana Succession?

When someone dies in Louisiana owning assets in their name, a Louisiana Succession is required to administer those assets and transfer them to the heirs. When someone in those circumstances dies leaving a last will and testament, the Will likely appointed an executor. But if no last will exists, then often a judge must appoint an Administrator of the Succession. So, who should be the Administrator of a Succession?

Once appointed, the Administrator often opens an Estate bank account, deposits funds from previously frozen accounts into the estate account, pays estate expenses from the estate account, sells estate assets, such as vehicles, investments, or real estate, and handles other necessary Succession administrative matters.

But someone must petition the court and ask a judge to be appointed the Administrator. Who should that be? Well, it's best if that person has the support of all of the other heirs. If all of the heirs agree, then an Administrator can be appointed as an "Independent Administrator," which lessens some of the bureaucratic red tape that must be handled.

When a surviving parent dies, and an Administrator must be appointed, things work well when those heirs all get together and agree that one of them should be appointed the Administrator. 

Sometimes, but rarely, a co-owner of property requests to be appointed an Administrator because real estate needs to be sold, the deceased was a co-owner, and another co-owner petitions the court to be appointed the Administrator so that the property can be sold.

Note that an Administrator will be entitled to compensation from the estate. Sometimes, an Administrator will waive their compensation because the Administrator wants to sell of the heirs treated equally. In addition, an Administrator's fee would be taxable income to the Administrator, while an inheritance is generally income tax free.

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.

How Traditional, Simple Louisiana Estate Planning Can Wipe Out The Savings

This is my attempt to educate a few Louisiana folks on the front end about estate planning so they don't get bit on the back end.

Traditional estate just doesn't always work like it used to. It's typical and traditional for married couples, at some point, to go see a lawyer about getting a Will done. Then, the attorney prepares a Will that, typically, either leaves OWNERSHIP or USUFRUCT to the surviving spouse. In fact, most couples don't know what they did - they just know they wrote a Will.

Well, one of the biggest drains of an estate while you are alive can be long term care expenses. I hope that this enables you to realize that how you arrange your estate planning legal documentation can have a profound impact on what you leave your family and what you leave what some people call the Evil Empire of the State of Louisiana.

Let's take an example. Let's say that Dad died. Dad had saved over the years enough to accumulate some CDs. His CDs, when he died, totaled $500,000 in value. And let's say Dad's traditional Will either left Mom ownership or usufruct of the $500,000.

Now that Dad died, Mom cannot live alone. She needs around the clock care. So Mom goes into the nursing home. The children think that the $500,000 is PROTECTED, because Dad left it to the kids but left Mom only the usufruct. But of course they are all quickly informed that Mom must spend the entire $500,000 on her nursing home care before Mom would qualify for Louisiana Long Term Care Medicaid. 

Of course this is when Mom and all the kids say, "Well we did not know!" Or they say, "Nobody told us....". Or they say, ""This doesn't seem fair when 3 out of 4 people in the nursing home are on Medicaid..." Or, "Surely there is something we can do at the last minute here..." Or, "Can't we just hide the money in a hole in the back yard?" Or, "Daddy just wanted to take care of Momma..."

Here's the key: Plan for these situations in advance. What Dad and Mom are getting legal affairs in order, it makes perfect sense to have an intelligent discussion about how they should leave things to each other and the family in a way that the family does not lose it to long term care expenses, taxes, or other government intrusions.

Hopefully this little piece of education can help some unknowing families get ahead of the game and protect what they've worked for. In the past, only the wealthy could afford to pay lawyers and other professionals to get the best estate protection advice. Now, with the advent of youtube and other free social media networks, anyone who wants to education themselves can find out just about anything on the internet and then seek out the right help to protect themselves and their family.

Paul Rabalais
Louisiana Estate Planning Attorney
www.RabalaisEstatePlanning.com