Property in Trust

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

The Big Problem in America Regarding Revocable Living Trusts, and What to Do About It! Share This Video Today.

If You Have a Revocable Living Trust, Watch This Now! Congratulations. You took some major steps toward making settling your estate easier. The Probate can be difficult, it takes longer than people want. It's expensive, a hassle, it's a court proceeding.

There's a big estate planning problem out there. The titling process is getting neglected causing families to go through probate.

However, when the revocable living trust is fully funded, the estate settlement is a beautiful thing. But your living trust is only as effective as the assets that you title into it.

Many fully funded trusts are settled without attorney involvement. The surviving spouse maintains access to assets. The surviving spouse can sell the home and buy another, and can access all financial accounts.

Even when probate is avoided, survivors are having to deal with funeral homes, death certificates, the Social Security office, the VA, financial institutions that hold IRAs,  bills that keep coming in, and insurance companies if the deceased had life insurance or annuities. Then, when you add on top of that the requirement of a probate when it was unexpected, then that sometimes is that straw that broke the camel’s back – survivor’s are fragile – going through grief and stress of the loss of a loved one.

There are a few reasons that trusts don’t get funded. People forget they owned that piece of property. People thought they had beneficiaries on all accounts. People didn’t think about buying the new property in the name of their trust. People didn’t think about opening that new account in the name of their trust. People may not have known that they needed to transfer their LLC to their trust. They kept a minimal amount of shares out of the trust. They thought their attorney was going to handle getting everything in the trust, but an attorney can only transfer certain assets into your trust.

Do these three things:

(1) Share this information. Surely you know other friends and colleagues that can benefit from this information. If you are an estate planning attorney, share with your clients along with a note to contact you if they need legal help. If you are a financial advisor, share with your clients and prospective clients along with a note to contact you if they need help titling and beneficiary designations.

(2) Fund your trust. While the process isn’t difficult, it’s easy to get sidetracked or procrastinate. Just make funding your trust a priority and keep going until you’re finished. Take a look at everything you have this is titled. Determine whether assets are probate or nonprobate. Probate assets, in general, go in your trust. There are many excellent attorneys around the country willing to help. If you need a lawyer’s help, get it. While you are at it, update your beneficiary designations.

(3) Write a Comment. if this video can help one person avoid probate and make things easier for their survivors, it’s worth it. Comment with your positive comments and experiences on youtube or linkedin or wherever else you might see or hear this, so that others can and will benefit from your experience.

Now go leave a legacy! Your family will thank you for it.

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

Three Aspects To Maintaining Your Living Trust Based Estate Plan

Once you sign your Revocable Living Trust and other ancillary estate planning documents, you should feel peace of mind with knowing that  you've taken steps to protect yourself and your family. However, you cannot set it and forget it. There's some work left to do.

The following are three aspects to maintaining your trust-based estate legal program. 

(1) Trust Funding. As far as avoiding probate is concerned, your trust is only fully effective at helping you avoid probate to the extent that your probate assets are titled in the name of your trust when you die. When you sign your trust, or immediately thereafter, is the best time to title assets in your trust name. You will sign documents transferring your real estate to your trust, and you will work with your financial institutions to make sure that your investments are titled correctly.

(2) Life Changes. You should review your estate program when you have a major change to your life circumstances, such as, divorce, have children, remarriage, enter a blended family, death of a beneficiary, agent, or trustee, you move to another state permanently, you inherit a significant amount, or you change your mind regarding who will inherit or who will be in charge of your estate.

(3) Law changes. Not every law change requires that you revisit your estate planning program. However, recent changes to our federal gift and estate tax system has caused people to structure their estate planning legal program with less emphasis on estate tax avoidance, and more emphasis on capital gains tax avoidance, income tax avoidance, and long term care Medicaid eligibility.

Again, congratulations are in order for taking steps to put an estate legal program in place. But make sure that you complete it in both the short term and the long term by funding your trust the right way, and revisiting your plan in the event of significant life or law changes.

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

What Is a "Pour-Over" Will?

Generally, people who establish an estate planning legal program either establish a Will-based estate plan or a Trust-based estate plan. When someone establishes a Trust-based plan, often one of the goals is to have assets titled in the name of the trust at death so that those assets can be distributed immediately to the trust beneficiaries without going through the Louisiana Succession, and its inherent delays, expenses, and aggravations.

People often ask, "If I have a trust, do I need a Will." Well, a pour over will is used in conjunction with a trust based plan. The purpose of the pour over will is to serve as a safety net. If, either intentionally or unintentionally, assets at death are titled in the name of the person who established the trust, then the probate proceeding will be necessary to pour-over those individually owned assets into the trust. 

Often, the ideal scenario is to have all assets titled correctly so that, at death, there are no "probate assets" in the individual's name, and the pour-over Will does not even need to be used. But the pour-over will is prepared and signed in virtually every instance where there is a trust-based plan.

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

When a Corporate Trustee May Be Appropriate

People create trusts for lots of different reasons. A few reasons include putting assets in a living trust to avoid probate, providing that assets after death remain in trust to be doled out to children or grandchildren over time as opposed to in a lump sum, or leaving assets to a trust for a 2nd spouse and having those assets revert back to your children after the death of your surviving 2nd spouse.

Often, people who create trusts designate an individual to be the trustee, Successor trustee, or co-trustee. These individuals are often family members. But sometimes, people who set up trusts are more comfortable naming a corporate trustee because naming an individual or family member as trustee is simply not appropriate.

Perhaps you do not want to show bias toward one of your children by naming them as a trustee. Or perhaps because of the potential conflict between children and a 2nd spouse, you don't want to name one of them as a trustee. 

Some of the reasons that people have designated a corporate trustee are as follows:

(1) Experience. Corporate trustees often better understand trust provisions and trust law - more so than an individual that has never served as a trustee.

(2) Unbiased. An individual who is also a beneficiary of a trust may find it difficult to be biased in the administration of their duties as trustee. Corporate trustees can act with more bias.

(3) Accounting. Corporate trustees are capable of preparing and providing the necessary trust accounting, and, if necessary, the trust tax return preparation.

Note that corporate trustees typically require that the trust assets must meet or exceed certain values. If the trust assets are minimal, then an individual trustee who is willing to serve with little or no compensation may be your best or only option.

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

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.

Info to Gather When Starting "Avoid Probate" Living Trust Based Estate Plan

I'm often asked, "Paul, what information do we need to gather and bring in to get started on our estate planning?" Well, this advice is based on a "typical" (even though there is no such thing as typical because every family's situation is unique and requires customization) person or couple who wants to set up an estate legal program and prevent their family and loved ones from having to go through the court-supervised judicial probate or Succession estate administration process. This typically involves establishing a Living Trust and transferring title to some of your assets into your trust while you are alive in order to make it easy for your Successor Trustee to access and disburse those assets when you die.

In general, there are three groups of information that must be provided: (1) family information; (2) asset information; and (3) substantive legal decisions.

(1) Family Information. This is typically simple. We are going to need the names of all who will participate in your estate planning program either while you are alive or after you die. This typically involves the full names (as you would have them listed in legal documents) of yourself and spouse, children, and sometimes grandchildren or others if they are included. We typically do not need the social security numbers of all of these people. although you may have to provide these numbers to financial institutions on items like IRA and annuity beneficiaries.

(2) Asset Information. When you get started, you should have a good working knowledge of what you own. It is particularly helpful if you gather, up front, all of your real estate legal descriptions. In Louisiana, these real estate legal descriptions can be found on the "Act of Sale" from when you purchased the property, or the "Judgment of Possession" if you inherited the property. We need these up front so that we can prepare the necessary transfer documents that will be signed at the same time that you sign your trust. Documents regarding investments and brokerage accounts don't have to be provided up front (but great if you have them), because you cannot transfer those assets to your trust until after your trust is signed.

(3) Substantive Decisions. All of the "who gets what, how they get it, who will be in charge" decisions are gathered through the dialogue you'll have with your estate planning attorney. These are important decisions and you need an experienced attorney to guide you through this. But it doesn't hurt give some good thought to these things in advance.

Paul Rabalais
Louisiana Estate Planning Attorney
www.RabalaisEstatePlanning.com

Sell or Distribute Assets When Someone Dies?

When someone dies with assets, whether those assets are in trust or not, the people in charge must make a decision to either sell (liquidate) the assets, or distribute them in their same form to those left behind.

When someone with a living trust dies, the Successor Trustee is typically heavily involved in that decision. If it is appropriate to sell assets, then the Successor Trustee will sell those assets, the proceeds of the sale will be payable to the Trust, and the Successor Trustee will deposit those funds into a trust account for subsequent disbursement to the beneficiaries of the trust. Trustees will sometimes sell real estate (a home, for example) that the survivors have no use for. Successor Trustees may also sell mutual funds or other investments and disburse those to beneficiaries.

On the other hand, sometimes it makes sense for the Successor Trustee to simply distribute the assets to the beneficiaries in the same form. Occasionally, a family has an emotional attachment to stock that a parent owned, and the beneficiaries will receive the stock in their own name.

Sometimes the family will want to continue owning real estate owned by the deceased (or the deceased's living trust). The Successor Trustee, immediately after the death of the Settlor, can transfer the real estate to the beneficiaries, outside of probate, so that each beneficiary owns an undivided interest in the real estate. It's also not uncommon, if the real estate was not owned in a limited liability company, for the beneficiaries to form an LLC and put their undivided interest in the property into the LLC. This could limit their liability exposure. Each beneficiary would then own a membership interest in the LLC.

So there are lots of decisions, each with tax consequences, that must be made when someone with a trust dies. Note that if there was not living trust, then the executor of the Last Will has similar decisions to make, but the actions of the executor are under the scrutiny of the judge that is assigned to oversee the Succession judicial proceeding. It's generally easier to administer a trust after a Settlor dies than it is to administer a Louisiana Succession which requires extra judicial processes and supervision. 

Paul Rabalais
Louisiana Estate Planning Attorney
paul@rabalaisestateplanning.com
Office phone: 866-491-3884

What To Do When Person Who Set Up Trust Dies

Here's what needs to be done after someone who had set up a Louisiana Avoid Probate Living Trust passes away.

Obviously, there are a number of non-legal tasks that must be addressed, from making funeral arrangements to notifying family and friends. But once we start talking to a family about legal matters, the initial things we often review are the trust instrument and the assets.

Regarding the trust instrument, we will always initially review who was designated as the Successor Trustee or Co-Trustees. We'll also take a close look at what action is required after the death of a Settlor. The actions required may be very different depending upon whether the Settlor was married or single at the time of his or her death.

If the Settlor was married, the trust might require that assets be divided into two trusts after the first death. This was pretty much "standard practice" back when the estate tax exemption was lower and we wanted to make sure that the assets of the first spouse were not lumped into the estate of the surviving spouse for federal estate tax purposes. Now, with couples being able to exempt more than $20 million, it's not as critical that there be a division of assets upon the death of the first spouse.

If the Settlor, at the time of his or her death, was married, then the trust is likely to require distributions to the principal beneficiaries of the trust, although some trusts may require that assets remain in trust for some period of time.

Another thing we look at is the assets of the Settlor and in the trust. The trust may own real estate, investments, or other assets. The trust might be named as the beneficiary of the Settlor's IRAs, life insurance, or annuities.

And the Settlor may have owned assets in his or her own name when the Settlor died. Assets may have either intentionally or inadvertently been left out of the trust. If there are probate assets left out of the trust, then we want to determine the existence and contents of, perhaps, a pour-over Will. If there are probate assets in the Settlor's individual name (not in the trust), a Succession may be required to pour-over those assets into the trust for distribution.

Finally, as part of this first step, we want to review the trust instrument to determine the rights and obligations of the Trustee and the beneficiaries. Some trusts have customized duties and powers that must be followed.

Bottom line - don't assume that you know what the trust instrument provides and requires. Work with an estate planning attorney who can spot and solve issues that you do not know exist.

Paul Rabalais
email: paul@RabalaisEstatePlanning.com
Offices: All over South Louisiana
website: www.RabalaisEstatePlanning.com

Nine Elements of a Louisiana "Avoid Probate" Estate Legal Program

Many seniors in Louisiana express a desire that their family and loved ones avoid the court-supervised probate process when they die. Because every family is unique and each person or couple owns different types of assets, it's important that they have a foundation for their Program. The following is a description of nine different elements of the Louisiana "Avoid Probate" Estate Legal Program.

(1) Revocable Living Trust. Their Revocable Living Trust ("RLT") is the foundation of their program. This is the customized legal instrument where you state who is in charge of your trust when become incapable or when you die, who will inherit or receive distributions from your trust after you die, and it will also state the rights and obligations of all of the parties that are involved. Your RLT really replaces the traditional "Last Will and Testament." The disposition of your trust assets are controlled by your trust instrument, not your Last Will and Testament.

(2) Pour-Over Last Will and Testament. If you happen to own any assets in your name when you die, and the title of which becomes frozen when you die because they are in your name, your Pour-Over Will is necessary. The executor of the WIll, after your death, will hire an attorney and go through the court-supervised Succession procedure to have those assets in your name transferred to your trust. Note that many people who set up an "Avoid Probate" Legal Program never need to utilize the Last Will because all assets will be titled in a way making the Succession unnecessary. "Funding" your trust (or re-titling your assets) is a critical step in the process so that nothing is left in your name when you die that would require a judicial proceeding.

(3) Durable Power of Attorney. This can also be referred to as Financial Power of Attorney, General Power of Attorney, or POA. An example of when this may be needed is when you are incapacitated and there is an IRA in your name and you are unable to transact the IRA due to your incapacity. Your POA should enable your "Agent" to act on your behalf at the financial institution where the IRA is held.

(4) Health Care Power of Attorney. Also called a Medicaid Power of Attorney or Health Care Proxy. This will enable your trusted family member or friend ("Agent") to talk to doctors and access your medical records in the event you are unable to do this yourself.

(5) Living Will Declarations. This is the legal instrument where you make your wishes known regardling life support machines. People who execute Living Wills typically want to relieve their family from the burden of making an end of life decision by putting their wishes on paper, in advance.

(6) Asset Transfers. All of your funding and re-titling documents should be organized in the Asset Transfers portion of your Estate Legal Program. This is where transfers of real estate, investments, and business interests are documented.

(7) Burial and Funeral Wishes. Part of completing your Estate Legal Program may involve informal documentation of your wishes regarding certain aspects of your passing, such as your burial and funeral wishes. 

(8) Distribution of Personal Effects. Some people provide for the distribution of their non-titled personal effects (jewelry, furniture, guns, etc.) in their formal legal documents. Others take a simpler approach and make an informal list of how they want their personal effects disbursed. Check with your attorney regarding the best way to provide for the distribution of your personal effects.

(9) Trustee Education. Since the establishing of an estate legal program may be new to you, your attorney should provide both you and your Successor Trustee(s) with education and instructions as to how to best serve as a Trustee of Co-Trustee. 

While every client is different, with different needs, this should give you a pretty good example of what the typical estate planning program consists of. Now go take care of business!

Paul Rabalais
www.RabalaisEstatePlanning
Law Offices: All over South Louisiana
Phone: 866-491-3884

Why Some People Transfer Their Business Interests To a Living Trust

Some people who own interests in a small business want to arrange their legal affairs so that there is no interruption in the business when the business owner dies.

When an LLC owner or an owner of a privately held corporation dies, the ownership interest must be handled through the court-supervised Succession or probate procedure before business can continue. To avoid business disruption, or just to make it simpler for the business to be transferred after the death of a business owner, the business owner, during his or her lifetime, will transfer or assign their ownership interest to their living trust. When the business owner dies, the Successor Trustee can continue managing the business, or the Successor Trustee can immediately transfer the business interests to the appropriate trust beneficiaries.

Note that if you own an LLC, then your ownership interest is called a "membership interest." If you own stock in a privately held corporation, you will be a stockholder of either a C or S Corporation.

Give us a call at 866-491-3884 if you're interested in making it simple for your loved ones to continue managing and owning your business interests.

What Assets DON'T Go Into the Louisiana "Avoid Probate" Living Trust?

When someone asks me to set up an estate legal program to avoid probate, they often ask me something like, "Do ALL of my assets need to be in my trust to avoid probate?"

It depends on what kinds of assets that you own, but most people do not need to transfer all of their assets to their trust. Some assets that you own, by their nature, avoid probate.

IRAs and other retirement accounts, avoid probate. When you die, your IRA is payable to your designated beneficiary, outside of probate. In fact, IRA rules do not allow you to transfer your IRA to a trust during your lifetime. This applies to both traditional and Roth IRAs - they avoid probate.

When avoiding probate is the primary goal, ownership of life insurance does not need to be transferred to your living trust. When you die as the insured, your life insurance death proceeds will be payable to the beneficiary that you designated.

Annuities are another example of an asset that avoids probate, just like life insurance.

Note that it might make sense to name a trust as the beneficiary of these non-probate assets, but check with your estate planning attorney to determine the appropriate way to designate beneficiaries on your non-probate assets.

Transferring Real Estate To Your Revocable Living Trust

Some people don't like the thought that all of their real estate assets will be frozen when they die, in a way that their survivors will not be able to immediately sell the home or other real estate assets without first having to go through a court-supervised Succession procedure.

So some transfer their real estate to their living trust, and name a Successor Trustee who can either sell the real estate or transfer the real estate out of the trust to the appropriate trust beneficiaries.

Here are a few categories of real estate that Louisiana residents must deal with as they pass it along to their survivors:

Home. Many people own a home when they die. You can tranfer your home to your trust during your lifetime. You should work with your estate planning attorney to structure the title of your home so that you keep your property tax homestead exemption. Donating the home outright to your children during your lifetime will cause you to lose your homestead exemption, and your children will likely pay significantly more capital gains tax when they sell your home after you die. All this can be avoided with proper planning. Your estate planning attorney who is well-versed can help you.

Out of State Property. Louisiana residents don't like the idea of their family having to go through multiple probates, in different states. But this will be necessary if you own property in your name in more than one state when you die. You can avoid all of these probates by transferring both your Louisiana property and your out of state property to your Living Trust.

Undivided Interest in Property. Many people own an undivided interest in property. Four siblings, for example, may have inherited 10 acres total. Each sibling does not own their own 2.5 acre tract (unless the children divided the property formally). Each child owns an undivided 25% interest in the entire 10 acre tract. You can transfer your undivided interest to your trust without affecting the interests of the other co-owners.

If property you have is in an LLC (limited liability company), then you do not need to transfer this underlying property to your trust. Transferring your LLC membership interest takes care of this.