The Rabalais Law Firm's La. Estates Blog

Beware of the Louisiana Marital Portion

 

 

A gentleman came in our office this week whose wife had passed away years ago and he's about to get married for the second time. He has children and he's really concerned about protecting what he has for his children. I had to tell him about a special Louisiana rule called the Marital Portion and that rule is just for Louisiana. Most people don't know about it. The rule says if a spouse dies and they are rich in comparison to their surviving spouse, then regardless of what the rich spouses will says, their spouse is going to be entitled to some of the rich spouses estate. In this case if he dies, regardless of his will saying he wants to leave everything to his children, his wife is going to be entitled to 25% of his estate. He was going to write a will stating he leaves his estate to his children but this marital portion rule says because he's rich and she's poor, she gets a quarter of his estate no matter what. It can't be waived and there's no getting around it. So, be aware of this. It's just a special circumstance and often comes up when one spouse has a lot of separate property and the other spouse doesn't have much.

Louisiana Do It Yourself Will

 

 

I've been asked a couple of times this month to review some documents that someone printed online or purchased a kit. I've also been asked a couple of times about whether I feel that these do it yourself kits can do the job. 

 

Really, there are two reasons why you shouldn't use these. One, they don't go into the complexity necessary to accomplish what you are trying to accomplish. Everyone's circumstances are different. Everybody needs certain things and these fill in the blank forms don't do the job. The bigger reason you shouldn't use these is that Louisiana Laws are so different.  Most of these kits actually say that those Estate Planning documents you receive from do it yourself kits are not valid in Louisiana or U.S. Territories.

 

It always surprises me that these programs are sold in book stores and computer stores in Louisiana when they say that these programs are not valid in Louisiana.

 

Paul Rabalais

Louisiana Estate Planning Trends for 2012

It's been a reasonably quiet year insofar as Louisiana estate planning law changes are concerned. However, we are seeing several new trends in the Louisiana estate planning arena. On the federal side, it's a different story. It appears that Congress does not know up from down, and the estate tax appears to be nothing but a barganing chip and an after-thought which makes it really tough for you to determine how to set up your estate to leave it to your family with minimal government confiscation.

Here's a few observations as we wrap up 2011 and move into 2012:

• Federal Estate Tax Exemption for 2012. As of the date of this writing, the federal estate tax exemption for people who die in 2012 is $5 million. In addition, we have something new in place called "portablility," which allows the surviving spouse's estate to use the unused portion of the exemption of the first spouse to die. For example, if Dad dies in 2012 and uses only $2 million of his $5 million, Mom's estate (at Mom's later death) can have an exemption of $8 million. Clearly this is a tool for the wealthier families out there.
• Federal Estate Tax for 2013. Different ballgame. Unless Congress and the President change the law, the federal estate tax exemption for deaths occurring in 2013 is only $1 million, and portability will not be available. If your net estate exceeds $1 million and you die in 2013 or beyond, your estate will have to pay estate tax at a rate of up to 55% of the value of your estate!
• Using Trusts for Succession Avoidance. We're seeing an increase in the demand to keep the courts out of an estate settlement process. The way to do this is to create a revocable living trust and transfer your "Succession Assets" to your trust so that when you die, your family will not be forced to go through an expensive, time-consuming and often-stressful court proceess to transfer your estate to your heirs.
• Nursing Home Medicaid Planning. With monthly nursing home costs around $5,000 ($10,000 per month for couples), many Louisianians are asking us how to avoid depleting your life savings on nursing home costs prior to Medicaid eligibility. We're also helping lots of folks protect the value of their home from Medicaid Estate Recovery rights which give Medicaid the right to force your home to be sold after you die to get reimbursed for costs incurred by Medicaid.
• Powers of Attorney. In the last week, four people have to me how valuable it was that they have a Power of Attorney for their parent. People don't appreciate the value of an up-to-date, propertly prepared Financial and Health Care Power of Attorney until it needs to be used. Having a Power of Attorney in place prevents your family from having to go through the nightmare of a Louisiana Interdication, which is where you have to sue your family member to have them declared incompetent.
• Trend Toward Keeping it Simple. In this complex world of estate planning, consumers are asking to keep their estate planning documents simple. While some attorneys prepare Wills, Trusts and Powers of Attorney that exceed 100 pages in length, we strive to keep your estate planning documents thorough enough to do the job, but simple enough so that it doesn't take you weeks on end with a Black's Law Dictionary at your side to review them.

Here's to a prosperous 2012. Remember that estate planning is not a one-shot deal. If you've had a major change in your family circumstance, or your estate is large enough so that federal estate tax is possible, it's probably a good idea to have us take a look at your circumstances to that your estate plan does not get left behind.

Selecting a Trustee of a Louisiana Trust

 

I was working with someone yesterday and she wants to leave things to some very young people which included her heirs when she died.  She knows that inheritance for those young people is going to have to be managed for them in trust. So she had to pick a trustee who's going to manage all of that stuff for her young grandchildren and make sure that it's used for their education until they get it at a later date. She had to decide whether to use an individual trustee or a corporate trustee. So we analyzed that decision and she knew that she could select another family member to be an individual trustee. That family member really understands the needs of those beneficiaries. Sometimes the individual trustee doesn’t understand all of the formal duties that a trustee has but the individual trustee can hire accountants and attorneys to take care of those duties. Then she tried to determine whether she should use a corporate trustee. All of the large financial institutions will serve as a trustee of the trust and charge a fee. They don't quite understand the needs of a beneficiary perhaps as much as a family member would but they are certainly going to comply with all of their legal and accounting requirements and typically they invest the money well. It seems like a lot of people in Louisiana select an individual trustee but be aware that you have some decisions to make on whether to choose an individual or a corporate trustee to manage things when you're gone.

 

Paul Rabalais

Louisiana Wills: Leaving a Child Usufruct

 

 

I want to talk to you today about leaving the usufruct of your home to a child after the parents have passed away. I was working with a family not too long ago and they wanted the surviving spouse to have the right to live in the home for the rest of their lifetime then when the surviving spouses dies, they wanted their daughter to have the right to live in that home for the rest of her lifetime. So we set up a successive usufruct in their will. So when one spouse does, that spouse has usufruct which is very common, and then we took it a step further with a successive usufruct which means somebody that gets the usufruct after the person who you initially gave the usufruct to passes away. So the daughter is going to have a chance to live in that home for the rest of her lifetime. This family had some special reasons why they wanted to set their wills up this way.  After the daughter dies, the house will be sold and all the proceeds will be divided among the family members.

 

So just be aware if you have a child who you want to leave the usufruct to, you can. It's called a successive usufruct. It has to be in the will and it has to be worded just right.

 

Paul A. Rabalais

Do Louisiana Residents Need a Will?

 

I was giving a presentation a few days ago and somebody raised their hand and asked me if Louisiana residents really need a will. It only a few seconds to answer that question and the answer is yes.

 

A couple of years ago I wrote a blog post titled, "24 Reasons Why Louisiana Residents Need a Will." One reason is to make sure you designate who is going to get your stuff when you die. A second reason is to make things a lot easier for your spouse if you're married in Louisiana. For example, if you don't have a will, your spouse can't sell your house after you die without getting the permission of others and your children. A third reason is you want to designate who will be your independent executor. Click here to read the twenty-one other reasons Louisiana residents need a will.

Louisiana Wills: Parents with Minor Children

 

 

I just finished an estate plan for a young man who was divorced with a minor child yesterday. He wanted to make sure that if he passed away that whatever he left for that minor child would be protected. He didn't want his ex-wife controlling that money which would be the case if he didn't have a will. So he designated in his will that if he were to pass away while his child was still young, that child's inheritance would go into a trust called a testamentary trust. In particular, he designated his mother to be the trustee of his child's inheritance until that child reached the age of 25. Mom determines if the child needs money for their education, living expenses and health, then Mom can use it for those purposes. The ex-wife will not be in charge of the money and the money will not be dumped in the child's lap when they are 18 and not responsible enough to handle it.

Make sure if you are a parent of a minor child, married or single, set things up to designate a guardian and a trustee for your minor children just in case something happens.

Louisiana Usufruct Until Death or Remarriage

 

I was working with a couple last week regarding their Estate Planning. The wife was very particular on what she wanted. She inherited a family asset from her parents that produces some income. She wanted to make sure her children ultimately ended up with that asset.

 

So we set up her will and granted her husband usufruct over that family asset. That usufruct terminates when her husband dies or remarries, whichever comes first. If he remarries, that family asset will go to the children at that time. She is going to leave the remaining portion of her estate to her husband for his lifetime. So his usufruct of the remaining part of her estate will not terminate if he remarries.

 

Bottom line is to just know that you can set things up so that your spouse’s usufruct can last for their lifetime, it can terminate upon remarriage or a combination of the two.

Charitable Bequests From a Louisiana Revocable Living Trust

 

I met with a woman yesterday to set up a Revocable Living Trust for her to avoid the Louisiana succession. One of the other things she wants to do is leave 10% of her estate to certain charities but she was a little concerned because they may be the appropriate charity today but may not be tomorrow. So she wanted to do something that was a little interesting. She knows which charities she wants to receive 10% of her estate if she died today, but it may be different when she passes away 30 years from now. We're going to set up her estate planning documents to give her children the discretion to allocate the percentage to charities when she dies. She's going to let her children know her thoughts and once she dies, her children can make the appropriate donation.

 

So you have some flexibility. If you want to leave your estate to charity but not sure if the charities that you like today would be appropriate for tomorrow, there are some ways to set things up so the right charities get your charitable bequest.

Leaving IRA to Grandchildren - Required Distribution Rules

Met with a very nice couple last week that wanted to leave their investments to a trust for their grandchildren. One of the issues that we had to deal with was that the bulk of their investments were held in their IRA account.

I spent some time educating them about what their grandchildren would be facing from an income tax standpoint. The couple expressed that they did not want the grandchildren to get any of it until they were well into their adulthood.

I explained that since they were leaving an IRA to their grandchildren - even though it is going to a trust for the grandchildren, the grandchildren will be required to take distributions starting the year after the surviving spouse dies. I explained that the best we could do would be to set things up so that after the couple died, the grandchildren would be forced to follow the rules of an "Inherited IRA" and they would be required to take immediate distributions based on their life expectancy.

Nonetheless, we are still able to accomplish their objectives of providing an income to their grandchildren for many years, and then have the remainder turned over to the grandchildren when the grandchildren are nearing retirement age.

Anytime you name someone other than your spouse as the beneficiary of your IRA, be aware of the Inherited IRA rules that they will have to follow regarding their schedule for required minimum distributions. Their schedule will likely be very different than your schedule or your spouse's required minimum distribution schedule.

Paul Rabalais