Real Estate

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

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

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.

Should I Donate Property? Or Let Children Inherit It When I Pass Away

Several people in the last few days have asked me whether they should donate a piece of property to their child, or whether they should let the child inherit the property from the parent. 

There are several factors to consider when determining whether to donate property, or to leave to a child or other heir through your Will or Trust. Here's a few of the factors:

(1) Capital Gains Tax. If you purchased a piece of property for $50,000, and it is now worth $200,000, and you donate the property during your lifetime, the donee (the person you give the property to) will receive a "carry-over" basis. When the donee sells the property, they will pay capital gains tax on what they receive in excess of $50,000. If, however, the child inherits the property from you through your Will or Trust, the inheritor will enjoy the benefits of the "stepped-up" basis. The inheritor's basis will be the value of the property on the date of death. For this reason, many elect to hold on to their appreciated property and let the child(ren) inherit it.

(2) "I Don't Want Them To Sell It. Some people own family property and they do not want it sold after it has been transferred either through gift or inheritance. Perhaps that may be a factor that would warrant you keeping the property for your lifetime, and then allowing the inheritor to own it when you die - perhaps when they are more mature and more likely to abide by your wishes to keep the property in the family.

(3) The Property Generates Income. If the property generates timber or rental or mineral income, this may be a factor as to whether your keep it or donate it. Perhaps you want to continue to receive the income because you want it or need the income, or perhaps your child who may be in a lower income tax bracket may pay less tax if they receive the income.

(4) "I Just Him To Have It." Some people simple want their child or children to own the property - now. If that is really what you want - for whatever reason - then give it to them. Just make sure it is an informed decision in light of all of the other factors that come into play.

(5) Estate and Gift Tax. Because individuals have a $5.49 million gift and estate tax exemption that they can use by making gifts during their lifetime or by leaving assets to others when they die, the estate and gift tax should not be afactor for most people who are contemplating making gifts of property. If a gift is made that is larger than the annual exclusion amount (currently $14,000), no tax is due  - the Donor simply used up some of their $5.49 million estate tax exemption.

(6) Future Medicaid Eligibility. If there is a concern that the parent may need the Louisiana Long Term Care Medicaid benefit if they go into a nursing home in the future, this may be a factor that warrants making the donation now. If the parent holds onto the property and needs nursing home care in the future, the parent would not qualify for Medicaid until after he or she sold the property and used all of the proceeds of the sale on long  term care  nursing home expenses.

As you can see, several factors go into whether you should keep property or donate it before you pass away. Make sure your decision is fully informed - a mistake could cost your family plenty. For more help, call us at 866-491-3884.

"I Own Property In Three States? Will My Kids Have To Go Through Probate in Three States?"

I was talking to a couple last evening. They were engaging me to start the process of creating an estate planning legal program to keep what they had in their family the right way. They said they came to me because they had seen other families make mistakes and they wanted to get it right the first time.

They said they were impressed with my 26 years of estate planning legal experience, they found my book easy to read and understand, and they liked that I was certified as a Specialist in Estate Planning and Administration by the Louisiana State Bar Association.

The wife told me that she and her husband owned real estate in three different states: Louisiana, Alabama, and Colorado. They had a couple of unique circumstances in their family. They had a child that could not handle money or property prudently, and one of their children was the victim of a very bad marriage and they wanted to make sure the ex-spouse would never be involved - especially if their child predeceased them and things went to their minor grandchildren.

When I let them know that their family would need to go through three different probate proceedings in three different states - if they kept all of their property in their name - they seemed to get a little unsetlled. their main goal was to make settling their estate as simple as possible for the surviving spouse and the children.

So they are moving fairly quickly to establish an estate planning legal program so that all of their property and probate assets will be transferred to their revocable living trust. The trust will provide what happens to the property when they die: who will be in charge and when the children get it.

Now they will have a program in place that will avoid the family having to retain multiple law firms in multiple states at a considerable expense when they die. They said that even though their estate plan is not in place yet, they already have peace of mind knowing that they are doing what they need to do to protect their estate for their family - the right way.

Louisiana Succession With Land, a Mobile Home, and Bond Mutual Funds

Working with a really nice family getting their parents' Successions completed. Met with all of the children a couple of times as we developed an efficient plan for getting everything done. The parents' had Wills essentially leaving everything to the children equally. The Wills named two of the children as the co-executor. After going through quite a bit of information and discussion, our firm will be leading them through the Succession process that will look something like this:

  1. Step One - Confirmation of independent executor. We have already prepared, and all of the heirs have already signed, the initial court paperwork to get the executor "confirmed." Since the Will was written prior to 2001, we had to get all of the heirs to sign this paperwork. As an independent executor, the executor can take certain actions without having to get a judge's approval first.
  2. Step Two - Estate account. Once the executor is confirmed by the court as the independent executor, the clerk of court will issue "Letters of Independent Executorship." The executor will then take these "Letters" to the brokerage firm and establish an estate account at the brokerage firm. The parents' brokerage account is currently frozen. But with the Letters, the brokerage firm will be required to establish an estate account and move the investments from the frozen brokerage account into the new estate account.
  3. Step Three - Managing the estate account. Expenses of the estate will be paid from the estate account. The family decided to sell the investments in the estate account so that cash will be readily available to pay expenses and ultimately, distribute to heirs. The refund check from the nursing home that is payable to "Estate of....." will be deposited into the estate account. The proceeds of the sale of the mobile home will be deposited into the estate account.
  4. Step Four - Detailed Descriptive List of Assets and Debts. Our office will prepare the required Detailed Descriptive List of Assets and Debts that the court must have before assets can be distributed to heirs.
  5. Step Five - Judgment of Possession. Our office will obtain the necessary court Judgment which orders third parties to transfer assets to the four heirs. A certified copy of this judgment will be recorded in the parish where the family owns land - this makes the heirs the new owners of the property. After expenses of the Succession are paid, the executor will distribute remaining funds in the estate account to the heirs, equally, in accordance with the Last Will of the parents.

There you have it. Often glitches appear when settling an estate and it's likely that "stuff" will pop out of the woodwork as we work on this, but wanted to give you an idea of a few of the steps that are involved in completing a Succession.

Let me know if a loved one has passed away, and the heirs want a simple and expedited process for getting all matters settled.

Baton Rouge Couple Wants To Keep All Estate Affairs Private

I was working with a couple today. They own quite a bit of real estate. They own property in Baton Rouge, Zachary, St. Francisville, New Roads, Prairieville, and St. Amant. One of the most important things they want to accomplish is to provide for an ultimate distribution of their property to certain family members, without the other family members having any knowledge of it.

They ruled out making all of these bequests in their Wills, because they know that when they die, it is required that their Wills be filed into the public record for all to see.

They were also concerned about putting their Louisiana real estate in their revocable living trust, because when real estate is in a trust, a summary extract must be recorded in the parish. This extract must show who the parties in the trust are.

But we worked out a solution where he could keep all of his estate planning legal affairs private. He put his different pieces of property in LLCs, and he provided for the distribution of the LLCs in his revocable living trust. Therefore, nothing needs to be filed in the public records since the trust owns no property. The trust owns membership interests in LLCs. So, the people who they intentionally left out of the trust will not be able to determine who the properties or LLCs were left to.

If you live in Louisiana and you want to engage an estate planning attorney to keep all of your estate legal affairs private, out of the public court system, and out of the court-supervised probate proceedings, then perhaps you should email me at paul@rabalaisestateplanning.com to determine whether we should talk about how to get it right.

Property Grandparents Leave Property Trust for Grandchildren

I was working with a Lafayette couple today in our Baton Rouge office. They had three main goals, and they had a number of secondary goals. The three main goals that they expressed to me at the beginning of the conversation were:

  1. They wanted to avoid probate;
  2. They wanted to save estate taxes;
  3. They wanted to designate a certain child to be "in charge" in the future.

Once we started talking, they opened up and mentioned a number of their secondary goals, which included:

  1. Leaving their business to a certain child;
  2. Leaving their home a certain way;
  3. Making sure the surviving spouse remained in control of everything;
  4. Keep the daughter's inheritance out of the hands of their influential son-in-law;
  5. Making a certain bequest for their four grandchildren to help them own a home.

The parents were quite proud of their four children. Their children had all worked hard and were accomplished. This particular couple owned no stocks and bonds, but they has built up a significant estate through real estate - they had been quite successful.

One thing this couple wanted to do was make sure their four children each would ultimately own a home. They felt strongly about the benefits of having a paid-for home. So, they are leaving a bequest to each of their four grandchildren, but they are structuring these bequests through their trust so that the funds for each grandchild can only be used for a down-payment or to pay down the principal of a grandchild's home loan.

I though to myself, "What a great legacy to leave to their grandchildren. The grandchildren will, in this difficult world, be able to get a head start on their lives and on achieving the American dream of home ownership."