Estate Planning Law Firm of Louisiana

Careful Wording For Bequest of Business in Will

Was working with a nice couple yesterday. They've spent years building a successful business. One of their children works with the business and much of the growth has been attributed to that child. The couple wanted to make sure that this particular child inherited the business, and that their remaining assets would be divided among all their children in a certain proportion.

Their business is owned by their LLC (limited liability company). Sounds pretty simple. Leave the LLC to that one child, and split up everything else.

However, they run their business out of a warehouse. What they failed to mention - until the very end of our discussion - was that the warehouse is owned by another LLC. In order to accomplish their objectives of leaving all the business assets to their child, we have to structure their Wills so that both LLC's are bequeathed to this particular child, with everything else being divided among the children.

We also talked about gifting small percentage interests of the business to the son annually to avoid estate tax - but that's another story.

Bottom line - if you are going to leave a business to someone in your will, make sure you structure the bequest so that it includes not only the name of the entity, but any other business assets that you may own individually or that you may own in another entity.

We can help. If you live in Louisiana and need help with estate planning for the succession of your business, give me a call at 225-329-2450, or shoot me an email at paul@rabalaislaw.com. Be happy to chat with you about it.

Paul Rabalais

In Their Own Words

“We were very pleased with the services Mr. Rabalais and his staff provided in our Estate Planning. Mr. Rabalais is very knowledgeable in Louisiana Tax and Estate Law and explained everything very clearly. We appreciated the efficiency of the staff and the process from the first visit to the last. Sending the documents to be read and corrected by email allowed us time to really study them and the corrections were complete prior to the last visit for signing. Thank you for the nice binder to keep everything organized in one place. We highly recommend you and your staff.”

 

-Randy and Debora Braswell

Greenwell Springs, LA

Another testimonial - thanks!

“Your Firm provided needed guidance and knowledge in our estate planning. Trusts and living wills were also drawn up for us. Information was shared in a very professional manner. Prior to signing the final documents, all misunderstandings and areas of confusion were thoroughly explained, necessary changes were made to the documents. Dale and I appreciate the final binder which was provided to us. The information contained in it provided one place to start the search for account numbers when needed.”

 

 -William and Dale W.

Baton Rouge, LA

Looking For Expert on Term Life Insurance AND the Internet

I'm on a mission to make it easy for parents with minor children to legally and financially protect their kids. My wife, Amy, and I have five kids and we know how busy it is these days for parents to take time to address these important but often neglected legal and financial issues. Most parents ignore that fact that they need to create important legal documents to name guardians for their kids, and to require that their children's inheritance be placed in trust for their kids.

Here's a few things I've done to accomplish this goal - but I've got a long way to go:

• I wrote a book in layman's terms which teaches parents of minor children what they need to do to protect their minor children.

• I created a website called www.yourkidsguardian.com. Louisiana parents can go to this website and create free legal documents designating the guardian of their minor children in the event parents die before their children reach age 18.

• I created a separate company which hosts a website which allows Louisiana parents to create self help legal documents like Wills, Wills with Testamentary Trusts, Durable Powers of Attorney, Health Care Powers of Attorney, and Living Wills. The site is still in test mode at this moment but you can check it out at www.YourLouisianaWill.com

I know that many parents have also neglected to purchase term insurance to provide for their minor children. On my www.YourLouisianaWill.com site, I'd like to give parents an opportunity to purchase term insurance (which would be payable to their children's trust).

I'm looking for someone who is an expert in both term insurance AND the internet that can partner with me to provide this valuable service to Louisiana parents. Do not contact me if you are not familiar with internet marketing, website development, marketing campaigns, and you are qualified, experienced, and licensed to sell term insurance in Louisiana. The person I work with must be courteous to others, self-motivated, and have a passion for what they do.

If you think you can help, send me an email at paul@rabalaislaw.com and let me know why. This is a tremendous opportunity.

Paul Rabalais 

Force Beneficiaries of IRA to Take Required Minimum Distributions By Naming Trust as Beneficiary

Have been asked a couple of times in the last couple of weeks to help people set up their IRAs so that when they die, the beneficiaries could only receive the required minimum distribution (RMD) from the IRA.

The reason people typically want to do this is twofold:

1. You virtually can guarantee that your beneficiary will receive annual income for the rest of the beneficiary's lifetime. The rules say that a non-spouse beneficiary must take RMDs over the beneficiary's life expectancy.
2. You can prevent your beneficiary from taking a lump sum distribution - requiring a hefty income tax bill - and then blowing the inherited funds.

Here's how it works:

• Determine who you want your beneficiaries of your IRA to be. It might be your children, your grandchildren, or other loved ones.
• Determine who will be the trustee of your "Stretch IRA Trust." This should be a responsible person or a trust company that will manage your IRA after your death and distribute to your beneficiaries their RMD amount.
• Work with an attorney like me to establish your Stretch IRA Trust.
• Give a copy of your Trust to your IRA custodian and make sure they will comply with the terms of your trust after your death.
• Name your trust as primary or contingent beneficiary of your IRA. Perhaps - if you are married - you want your spouse to be your primary beneficiary, and you want your trust to be the contingent beneficiary.

Paul Rabalais

A Happy Estate Planning Client

Thanks to Richard and Joyce McGraw of Baton Rouge, LA, for sending in the following note regarding their experience with our firm: 

“My wife and I heard Paul at a church seniors gathering and were impressed with the level of information that was presented in less than an hour on various wills, estate planning and preservation of assets. At this years Life After 50 event, I went to another Estate Planning by Paul and decided then that my wife and I both needed Power of Attorneys, Living Wills, and Estate Planning final Will and Testaments. Our intent was to protect remaining assets for our children or grandchildren.

 

At each of the above events and at our consultation meeting with Paul, he was very professional in a relaxed setting, asking and answering all questions of attendee. If someone needs this type of service, I would strongly recommend that Paul be considered.”

How Louisiana Parents Can Designate the Legal Guardian for Their Minor Kids

This is an issue that is close to my heart. My wife, Amy, and I smack dab in the middle of raising our five children. Our children mean the world to us and we certainly want what is best for them.

One of the most important things you can do as a parent of a minor child is to designate their legal guardian in the event you die before your children reach the age of majority - which in Louisiana is 18.

Without the proper designation, a judge will select your children's guardian. Even if the judge puts your children and extended family through trying hearings to determine who the judge thinks would be best for your children, no one knows better than you who could best raise your children if you die.

The Louisiana term for guardian is "tutor." Essentially, it is the backup parent that will take your place if you die before your children reach age 18. Certainly you want to have a say-so in who will raise your children if you can't.

Louisiana have parents have two ways (and two ways only) to designate their children's legal guardian:

1. Designate it in your Will. This reason alone is enough for parents of minor children to have Wills. Reality is, however, that most parents of minor children procrastinate (a costly mistake and not a valid excuse) on getting all of their legal affairs in order; or
2. Sign a simple declaration executed before a notary and two witnesses.

I'm working on some legal documents that parents can download for free and designate the legal guardian for their children in the event the parent or parents die before the children reach majority. Every Louisiana parent should make this designation!

Stay tuned for additional information about these free legal forms that you can download, complete, and sign.

Paul Rabalais

Trust for Your Children - Benefits Often Overlooked

In Louisiana, trusts have been used sparingly. Common uses for trusts in Louisiana have included:

·         Testamentary trusts for young children used if the parents die before the children are mature enough to handle an inheritance;

·         Revocable Living Trusts are used occasionally by those wishing to avoid probate;

·         The Louisiana “usufruct” has taken the place of the “credit shelter trust” used in all of the other states to ensure that both spouses utilize their estate tax exemption;

·         Irrevocable “Crummey” trusts are not used as much since gifting to children’s trusts has less appeal now that the estate tax exemption has increased from $600,000 to $3,500,000; and

·         Informed middle class families often transfer assets to carefully drafted trusts to ensure Medicaid eligibility and protect one’s estate from rising nursing home costs.

But there is another type of trust that most attorneys and advisors overlook – or perhaps they do not know that this type of planning exists. In our office, we call it the Children’s Inheritance Trust. In Louisiana, there are limited benefits to you setting up a trust for yourself and putting your own assets into it (commonly called a “self-settled” trust). However, there can be tremendous benefits to your children if you set up your estate plan so that when you die, your assets go directly into your children’s special trust that you set up for them. The following table shows the benefits that your children can recognize if you set up your estate plan so that instead of your assets going directly into your children’s name (an outright bequest), your estate goes into separate trusts for each of your children. Your children can maintain control of their trust for their lifetime, and recognize the following benefits:

Children’s Inheritance Protected:	Outright Bequest	Bequest to Children’s Inheritance Trust
From Child’s Divorce	No	Yes
From Child’s Lawsuits	No	Yes
For Grandchildren When Child Dies	No	Yes
From Probate at Your Death	No	Yes
From Estate Tax When Your Child Dies	No	Yes
From Your Child’s Bankruptcy	No	Yes
From Probate When Child Dies	No	Yes
From Child’s Nursing Home Expenses	No	Yes

The biggest potential drain on your children’s inheritance will likely be taxes, divorce, lawsuits, and long term care expenses. What if you could leave them an inheritance that was protected from these all-too-often life changing events.

If you want to know how to protect your children’s inheritance, call our office at 225-329-2450 and schedule a no-cost meeting with me, or send me an email at paul@rabalaislaw.com. Make sure you put “Protect Children’s Inheritance” in the Subject Line. Don’t procrastinate on this one. Your children’s entire financial future is at stake!

Paul Rabalais

Louisiana Payable on Death Bank Accounts

We get many questions about whether an individual can set up a bank accounts, such as a checking account, savings account, or certificate of deposit (CD) and name a beneficiary or beneficiaries of that account, and whether a designation like that would be valid.

If you want a bank account to be payable to your spouse, one or more children, grandchildren, parents or siblings, you must, at the time the account is established, give your bank an affidavit stating that all designated beneficiaries of your account are within the required degree of kinship.

The title of your account must include the terms, "in trust for", "as trustee for", or "payable on death to"  your beneficiary or beneficiaries.

The above provisions "shall apply notwithstanding the fact the decedent designates a beneficiary by last will and testament."

Does this previous language mean that banks are released from liability for paying the designated beneficiaries even though ownership is supposed to go to the person designated in the Will? Or does it mean that a bequest in a Will is irrelevant when a bank account owner has properly designated a beneficiary.

Perhaps you should do both to be safe:

1. Designate your beneficiaries in accordance with our "Payable on death accounts" statute; and
2. Make a consistent bequest in your Will of these accounts.

If I'm missing something, feel free to comment. This is a big issue for many older Louisiana residents who want to assign certain accounts to certain family members,

Paul Rabalais

Easy Approach To Business Succession Planning

I spoke to two different business owners recently about what would happen regarding the sale or disposition of their 100% owned business when they died.

The first thing we noted to each of these individuals was that their businesses were community property that they owned with their wives. Even though the business is titled in the husband's name, and the husband was the only spouse who built the business, as long as the business was formed during the marriage, it is community property and owned by each spouse.

It appears that both business owners will keep things simple with their estate plans. They will appoint either their spouse or some other third party as the independent executor of their estate. When they die, the surviving wife (as owner of one-half of the business) and the independent executor (as owner of the other one-half of the business) can transact whatever terms they feel necessary regarding the disposition of the business.

One business owner considered having key employees purchase life insurance on the business owner's life so that when the business owner died, the executor and surviving spouse would sell the business to the key employees. The key employees would use the life insurance proceeds to pay the estate and the surviving spouse for ownership of the business. This arrangement would need to be set up in advance.

If you live in Louisiana and want to find out more about how your business should be handled after your death, simply send me an email at paul@rabalaislaw.com (put "Need Business Succession Help" in subject line) or give our law firm a call at 225-329-2450.

Until next time...

Paul Rabalais