Protect Surviving Spouse

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

What To Expect - The 1st Conversation With Estate Attorney

The planning and strategy conversation that you have with your estate planning attorney may be the most important conversation you ever have. Too many lawyers like to hear themselves talk. But if the lawyer is doing most of the talking, then it is impossible for the lawyer to customize an estate legal program that covers, in necessary depth, all of the needs of the client. I like to say that God gave us attorneys two ears and one mouth, so we should be listening to clients twice as much as we should be speaking.

Initially, the conversation should start out with an attorney finding out what you most want to accomplish about the transition of what you've worked for from one generation to the next. No two people or couples are alike. But it's the attorney's role to find out what is REALLY most important to you and then dig a little deeper with the right questions so that all of your emotional needs regarding you and your family can be met.

Note that all of this should be done in layman's terms. The best attorneys are the ones who ask the right questions and LISTEN, and then respond with another appropriate question. 

Finally, after some time, the attorney should be able to repeat what your biggest concerns are and how those might be addressed with a customized estate legal program. If the attorney did their job, you will think that what he or she concluded was dead-on (no pun intended) with what you want for yourself and your loved ones. Even though nothing's been prepared or executed, you should have peace of mind that you are underway in having the perfect estate planning program designed.

Then, it's just a matter of implementation.

Paul Rabalais
Louisiana Estate Planning Attorney
www.RabalaisEstatePlanning.com

Difference Between Pre-Nup and Will or Trust

I was working with a couple recently. Each spouse had children from a previous marriage, and they wanted to make sure their estates were set up the right way to protect themselves, their spouse, and their children - the right way. They knew there was the potential for conflict when they die because the sets of children did not know each other very well, and we all know what happens when people who do not know each other well have to share an inheritance!

The couple had a pre-nup from before they got married about 20 years earlier. Note that pre-nup can also be referred to as "Marriage Contract," or "Separate Property Agreement." They also had old Wills. Some of the provisions of the Wills were in conflict with what the pre-nup stated.

This led me to want to educate you about the difference between the two. In general, the purpose of the pre-nup is to determine who owns what. In the typical pre-nup when spouses get married later in life, and they each have their own children, the spouses will want to deviate from the presumed community property regime, and they will want to keep everything as separate property - what the husband has and what the husband earns during the marriage is HIS, and what the wife has and what the wife earns during the marriage is HERS. So it is real clear who owns what when one of them dies (or, if they get divorced) - no community property. The pre-nup is not the place to say who gets what when you die. In Louisiana, each party is represented by a separate attorney, each party signs the pre-nup, and it is typically recorded at the courthouse. It's a contract.

The Last Will, or the Revocable Trust, dictates who gets what when you die, and who is in charge of the administration and distribution. The WIll or Trust is not the place to try to control what is separate and what is community. Sure, your assets may retain their community or separate property status when placed in a trust, but the WIll or Trust should merely be used as a vehicle to dispose what you own, not declare what you own with your spouse.

Too many times we see conflict between the provisions of the Marriage Contract and the Last Will or Trust. You are asking for trouble if that is the case. Make sure you understand the role of each so that there will be a simple and quick estate administration when you die, with everyone (and the lawyers) being clear on everyone's rights.

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

If You Have Usufruct, You Have Debt

This post should help you understand the full consequences of either leaving someone the Louisiana usufruct of an estate, or inheriting the usufruct of an estate.

Here's an example. Dad dies leaving a Last Will which left the usufruct of his estate to Mom. Together, Mom and Dad had about $1 million in the bank (checking, savings, and a number of CDs). About a year later, after Dad's Succession was complete, all of these bank accounts were put in Mom's name only - which the usufructuary is permitted to do. Family circumstances warranted that Mom change her Will. Mom died a couple of years after that.

All of Mom's heirs assumed that since all of the money was in Mom's name, and that Mom left a Last Will and Testament, that all of the money would go to them. But there were dead wrong - pun intended.

Since Dad left Mom the usufruct of his estate, Mom (or Mom's estate) owed a debt to Dad's heirs (also called a usufructuary accounting due to the naked owners). Dad had left Mom the usufruct of about $500,000. That "usufructuary debt to Dad's naked owners" needed to be satisfied first before any of Mom's heirs inherit a penny.

And if Mom had spent some of the money and only had enough at her death to satisfy the usufructuary debt, then Mom's heirs would not inherit - even though she had a very clear Will leaving her money to her heirs.

While usufruct can be appropriate in some circumstances, you and your spouse need to be aware - on the front end - about what might happen on the back end. While usufruct might be the way to go, there are a number of other alternative ways you can leave your estate to your loved ones. To start a discussion, call our office at 866-491-3884.

Go TIgers!

Louisiana Usufruct and Long Term Care (Nursing Home) Medicaid

We get lots of questions about whether people who own the Louisiana usufruct can qualify for Louisiana Long Term Care Medicaid benefits.

So I'm sharing information today with you from the Louisiana Medicaid Eligibility Manual regarding usufruct and Medicaid.

When someone who owns a usufruct is in a nursing home and attempting to qualify for Medicaid, the first thing you want to determine is whether their usufruct is over a consumable or a nonconsumable. 

If the person owns a usufruct of a consumable, such as money, certificates of deposit, promissory notes, bank accounts, etc., then the entire amount of the asset's value is a Countable Resource. So, if Dad died leaving Mom the usufruct of a bank account that had $200,000 in it when Dad died, then the entire amount is considered a resource of Mom. Some people mistakenly believe that since there are naked owners (typically, the children), that Mom does not have to consume these assets in the nursing home.

If the usufructuary owns the usufruct of a nonconsumable item, such as land, houses, shares of stock, etc., then the value of the usufructuary's usufruct must be determined by a Medicaid table that factors in the usufructuary's age. So, for example, if Dad died and left Mom the usufruct of a piece of land worth $100,000, and Mom is 80 at the time of her Medicaid application, then the table indicates that Mom's usufruct is worth 43.659% of the asset. So, by Mom owning the usufruct of a piece of land worth $100,000, she has a Countable Resource valued at $43,659. This is a problem for Mom. Perhaps she will need to sell her usufruct for this amount and then consume all of that money before successfully qualifying for Medicaid.

The problem here is that there is little that can be done at the last minute to solve this problem. But there's lots that can be done if you act early (ideally, at least five years before entering the nursing home. 

Find this helpful, go LIke our law firm's facebook page at Rabalais Estate Planning, LLC, and discover lots more.

Seven Common Uses For Trusts

People often mistakenly believe that trusts are for rich people. But you're about to find out that the trusts are used these days by all classes of people, and in some scenarios, trusts can benefit the middle class more than they can benefit the wealthy.

The following are seven common reasons people in Louisiana use trusts:

(1) Avoid Probate. Probably the most common reason nationwide why people use trusts. When you die with assets in your name, whether you have a last will or not, your assets are frozen. Your executor and your heirs will hire attorneys who will guide the family through the government-supervised probate (also called "Succession") process. Most people believe that this proceeding is too burdensome, costly, time-consuming, and just an overall pain in the behind. In some cases, it tears families apart. You can establish your revocable living trust and name trustees and beneficiaries of your trust, re-title assets into your trust while you are alive, so that when you die, your trustee disburses your trust assets to your beneficiaries, all outside of the government and legal system interference.

(2)  Avoid Nursing Home Poverty. The biggest threat to many people's life savings these days is not taxes or probate, but long term care expenses. With people living longer, if you own assets and need long term skilled care, you will be forced to pay for all of your own care out of your own savings until you have less than $2,000 remaining. If you work with the right people and set things up the right way, at the right time, and you get it right the first time, then you can protect your home and life savings from a forced spend-down in the event you need long term care in the future.

(3) Protect Irresponsible Heirs. Many people we work with want to leave an inheritance to their children or grandchildren, but they fear or they know that leaving a lump sum to certain individuals will enable them to squander the inheritance and spend it on the wrong things. You can establish a trust so that when you die, the inheritance for the financially immature heir can be doled out to him or her over time, or perhaps provide for a monthly stipend, or provide that someone else would have the discretion to determine when the heir is financially responsible enough to handle an inheritance. 

(4) Blended Family Situation. The biggest worry about blended families and estate planning is that when the first spouse dies, the worry is that all of the assets will go the surviving spouse. And then when the surviving spouse dies, all assets will go to the surviving spouse's children. The children of the first spouse to die won't get a penny. If you are a spouse in a blended family situation, you can establish a trust so that when you die, your assets are available for your spouse, but when your surviving spouse later dies, remaining trust assets go back to your children. This helps blended families protect assets for the right people.

(5)  Special Needs Trust. If you leave assets outright to someone who is getting government benefits, then the inheritance you leave them may get them kicked off of their benefits. By leaving the inheritance to what is commonly referred to as a "Special Needs Trust," you can arrange things in a way so that your heir continues to receive the valuable benefits, but also benefits from the inheritance that you left them the right way in a trust.

(6) Minors. Don't ever leave anything outright to a minor. When you leave life insurance or part of an estate to a minor, then that inheritance, while the child is a minor, must be directly supervised by a judge, and a judge must approve every expenditure of the inheritance on behalf of the minor, and then when the child turns 18, the remainder of the inheritance gets dumped in the child's lap. You can set up a trust so that you name a trusted friend or relative, or perhaps a company, to be the "Trustee" of a trust for the benefit of your minor child or grandchild. This will further make sure that what you leave to the minor is used for the right reasons outside of government interference, and is doled out the right way as the minor gradually turns into an adult.

(7) Avoid Taxes. Some people set up trusts to avoid taxes. The wealthy often establish trusts to move money from their "taxable estate" to an arrangement whereby assets are "out of the estate." It is important to note, however, that this estate tax affects only a small number of families. When an individual dies with an estate of less than $5.5 million, the estate is not required to file a federal estate tax return. Married couples can double the amount they can protect.

Importance of Documenting the Accounts in a Louisiana Succession After the First Spouse Dies

We started working on a Succession today out of our Baton Rouge office. The wife had passed away. Her husband was talking to me about helping the family get the Succession complete. The couple had been married for about 20 years, but they each had children from their prior marriages. The deceased wife had two children. The surviving husband had three children. The husband said that, for now, the relationships were good between himself and the two sets of children. He was hoping that the fact that his wife's estate needed to be settled would not harm the relationships among all of the parties involved.

Usufruct To Spouse - Naked Ownership To Children

We discussed how her wife left a Will leaving him the lifetime usufruct of her estate, and she named her two children as the naked owners. He stated that he wanted his three children to inherit his estate when he dies.

He brought in a list of all of the various bank accounts and investment accounts. They had about five bank accounts, an investment account at Fidelity Investments, and they owned a home worth about $500,000. We discussed how important it is now to fully document all of the bank accounts, investment accounts, debts, credit card balances, funeral expenses, and medical bills outstanding, because when the husband later dies, the children of the two spouses will look back to how the assets were listed when the first spouse dies to determine who inherits what after the surviving spouse dies.

I gave the husband an example. I said, "Let's assume that the two of you owned bank accounts totaling $200,000 when your wife died. Let's also assume that the two of you had credit card and home equity debt of $40,000. Further, let's assume that there were $15,000 of funeral expenses. What all of this means is that when you die, your estate will owe your wife's children $65,000."

Usufructuary Accounting

He asked me how I came to that calculation. So I said, "Well the $200,000 of bank accounts are community property so you each own half of those accounts. As the usufructuary. you own your half of the accounts, and your estate will owe your wife's children her half of the accounts when you die. So, let's start with the fact that you will owe her children $100,000. Now, since there was $40,000 of community debt, your wife's share of that is $20,000, and you can deduct $20,000 from what you owe her children. And since there were $15,000 of funeral expenses, you can also deduct that amount from what you owe. So, $100,000 minus $20,000 minus $15,000 totals $65,000. That's the amount your estate will owe your wife's children when you die."

Then, we started talking about their home. The surviving husband said he intended to sell the home in a few months and move into something smaller. So I gave him another example regarding their home. I said, "Let's say you sell the home in six months for $520,000. At that moment, you converted a nonconsumable (the home) into a consumable (cash). If you sell the house for $520,000, you will get to keep all of the money, but upon your death, your estate will owe your wife's children $260,000 (one-half of the sales proceeds). 

The mistake many families make is that even though money typically does not go to the children upon the death of the first spouse, it is critical to properly document the assets as part of the Succession process. If things are accurately documented in the Succession (also known as "Probate") when the first spouse dies, it will make it much easier to accurately divide the assets after the surviving spouse dies. Shoddy records after the first spouse's death will likely lead to estate settlement disputes after the surviving spouse dies because the families will often have to "guess" at what assets and accounts existed years earlier when the first spouse died and there are no longer records from years earlier.

Louisiana Statewide Succession and Estate Planning Legal Services

If you want to set up an estate legal program and you live in Louisiana, whether you live in Baton Rouge, Covington, Metairie, Lafayette, Lake Charles, Shreveport, Monroe, or Alexandria, or if you've lost a family member and you want to make sure that the estate settlement is handled the right way to avoid disputes, now or later, among family members, give our Louisiana toll-free number a call at 866-491-3884, and we will be happy to have a conversation about how easy it is to do it the right way, the first time.

Handling a Louisiana Succession When Surviving Wife is Bequeathed Usufruct

I was working with a family over the last few years. The surviving wife called me after he husband died about two years ago. She wanted to get his "estate settled." She said he had a Last Will and Testament leaving her everything.

Ownership or Usufruct?

When she came in and showed me the Will, I realized that he had not left her "ownership" of everything, rather, he left her "usufruct", a form of ownership recognized only in Louisiana.
The husband left two daughters, and I told the surviving wife that we would have to get her two step-daughters involved in the Succession since they were the "naked owners" and needed to be part of the settling of her husband's estate.

Well, two years later after the daughters and their husbands prolonged court proceedings because they demanded accountings of all of bank accounts, CDs, investment accounts, IRAs, annuities, and Savings Bonds, the relationships are now strained and the surviving wife is now saying, "How can I make sure that MY CHILDREN don't have to go through all of this when I die?"

Easier Access When Wife Passes Away

So, we're setting things up now so that when she dies, her children will immediately inherit from her, and her husband's children will immediately get what they are entitled to from their father's Louisiana Succession. Certain things will be held in trust so there will be easy and immediate access to heirs when she dies, without having to go through the complexities, delays, and costs of probate.

If you live in Louisiana, whether in Baton Rouge or New Orleans or Monroe or Lake Charles or Shreveport, and you want to make your estate settlement easy, give us a call at 866-491-3884, and we'll start a discussion about how easy it is to get all of this straight.

Shreveport Gentleman Asks Great Question About Leaving Home For Wife

I was working with a Shreveport couple recently helping them set up their estate legal program. One of their three children lived in Shreveport. Another lived in Monroe. The youngest lived in Alexandria, Louisiana. All three of their children were married and some of those spouse exercised a lot of influence over their spouse.

The husband asked a question that we get quite often. It goes something like this, "How can I make sure that when I die, if my wife wants to sell our home, that she does not have to get the permission of our children to sell the home?

Well, the most popular ways to do this are as follows:

  1. Will Home Outright to Wife. The husband can have a Last Will and Testament and bequeath the Shreveport home outright to his wife. After he dies, the wife will have to complete the husband's Succession/Probate with any of the other heirs before she would be permitted to sell the home.
  2. Will Usufruct of Home With Authority To Dispose. This one can be tricky. The husband can write a Last Will leaving the usufruct of the Shreveport home to his wife. But that is not enough for her to freely be able to sell it after he dies. In the husband's Last Will, he will name the naked owners of the home, but he must provide (this is where it gets a little complicated) that the naked ownership interests are held in trust with the surviving wife as the trustee. It also helps if in his bequest of usufruct, he also grants her the "authority to dispose of nonconsumables." A Louisiana Succession will still be necessary after he dies to remove the property from the Husband's name.
  3. Put Home In Trust. He can put his home in a trust and designate that his surviving wife is the trustee of the trust after he dies. This may be the simplest way accomplish the husband's wishes. After the husband dies, a Louisiana Succession is not necessary to re-title property in trust. The home will simply remain in the trust after the husband dies, and the wife will immediately be able to sell the home without having to seek the permission of any of the children.

Whether you live in Shreveport, Monroe, Alexandria, Lake Charles, Lafayette, or any other Louisiana town or city. you can arrange your estate legal program so that your spouse will not have difficulty after you die if your surviving spouse wants to sell the home or other property. When a surviving spouse is forced to get the permission of all of the children (and indirectly that often means the spouses of the children chime in) it can often create irreparable family conflict which never improves.

Give our Louisiana statewide telephone number (866-491-3884) a call if this makes sense to you and you'd like your estate to be handled the easy and right way when you die. I look forward to the opportunity to have a conversation with you about your estate planning goals and how we might be able to help you accomplish them.

Paul Rabalais

 

 

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.

Lafayette Family Makes It Easy To Leave Home To Child With All Else For Their Children Equally

Helped a nice couple recently. They lived outside of Lafayette, Louisiana. They had four main estate planning goals: (1) Keep the surviving spouse in control of everything; (2) Make sure that any of their four children could handle future financial and medical decisions should the parents become incapable; (3) Make sure that one of their children (who did not own a home while their other three children all did well and had nice homes) inherits their home; and (4) Make sure that all four children work together after the parents die to sell their commercial property and divide up the proceeds as well as divide equally their stock investments and bank accounts that they have.

So, we will be helping them implement their estate legal program so that when one of them dies, the surviving spouse will not have to access the legal system to access their money or property. Probate will not be necessary when either one of them dies. Their revocable living trust will specifically provide that when they die, their home is to be transferred to their child. Their trust further stipulates that their four children will be the Successor Co-Trustees after both parents die so that the children will have immediate access and authority to work together to divide remaining assets equally and fairly - keeping sibling relationships strong, and keeping the government out of the settlement of their estate.

If you live in Louisiana and would like to start a conversation about setting up an estate legal program for you and your family, call Rabalais Estate Planning at 866-491-3884.

Louisiana Family Establishes Estate Legal Program for Two Children and Grandchildren

I was working with a Baton Rouge family recently who wanted to set up an estate legal program the right way for their family. Their goals were to make things simple for the surviving spouse; designate both of their children to work together, while staying out of the Louisiana probate, after both spouses died; and making sure that the money they left their grandchildren would be used for the right reasons.

So, we are establishing their revocable living trust so that the surviving spouse is the sole trustee after one spouse dies and is in complete control of everything (no Louisiana Succession or Probate); their two children will be the Successor Co-Trustees after both parents die, and since there will be no probate, the children could sell the home immediately after the parents pass; and third, instead of dumping $100,000 or so into each grandchild's lap when the grandparents die (encouraging even more bad habits from the grandchildren), the grandchildren's parents (who are very responsible) will serve as the trustee of the trust for the grandchildren. The parents will have total discretion regarding what the funds are used for, and the grandchildren's parents will transfer the inherited funds to the grandchildren when the grandchildren show the maturity and financial responsibility to be able to handle this kind of money the right way.