Paul Rabalais' Louisiana Succession Law Blog

Five Biggest Louisiana Estate Settlement Blunders

Over the 20+ years I've been providing estate settlement legal services to families in Louisiana, I've seen surviving spouses, surviving children, and other heirs make a host of mistakes when it comes to settling the estate of their loved one who passed away. While I could easily make a list of 20-30 common mistakes that are made, the following are five that we see quite often:

1. Working with the wrong lawyer or law firm. Every week we get calls or emails from people who are frustrated because they feel that their loved one's succession is stuck in mud, because the attorney can't/won't/doesn't know how to/refuses to do the work to complete the succession. Sometimes it's because the lawyer won't return phone calls. Sometimes it's because the lawyer doesn't understand Louisiana Succession law. Sometimes it's because the lawyer is too busy handling other things. Sometimes it's because you don't get along with the lawyer. Sometimes its due to miscommunication or no communication. It could be anything. You need to work with a lawyer of law firm who can work with you to develop a written plan to take you from start to finish, is available to handle things that come up during the estate settlement (and things WILL come up), and keeps you posted of progress along the way. Work with someone who provides their fixed fee in writing so you won't be unpleasantly surprised later regarding legal costs. Work with a lawyer or law firm that handles estate matters exclusively so they are not sidetracked by other more pressing legal deadlines that they have in their other matters.
2. Ignoring the estate settlement. No one is going to come knocking on your door after your loved one dies reminding you that it's your job to complete the estate settlement of your loved one. It's your job to take action, contact an estate settlement lawyer, and get the job done. Otherwise, there could be some hefty estate tax penalties and interest due if an estate tax return was required to be filed. Plus, you can't sell the house or any other estate assets until the Succession is complete. And, the longer you wait to do the Succession, the harder it is to gather all of the required date of death assets and values that must be disclosed on the Detailed Descriptive List of Assets and Liabilities. So, Git-R-Done.
3. Failure to Maintain Open Communication With the Heirs. This one causes family relationships to break. There is little that causes more stress than being involved in an estate settlement but not being able to get basic information about the workings of the matter. This causes stress, resentment, suspicions of impropriety, lack of trust, and worse, a complete and permanent breakdown of the relationships of what were formerly loving family members. Work with a law firm that has the legal, technical, and client service skills that will keep all of the heirs current on the progress of the estate.
4. Ignoring Current and Future Tax Consequences. If the Successsion / Probate / Estate Settlement (call it what you want) is done wrong, the heirs will pay more tax. Executors, trustees, and heirs have certain decisions they must make when the estate is being settled that will affect (often adversely) the amount of tax that the estate or the heirs must pay. Most estate settlements have tax consequences in the tax areas of: estate tax, capital gains tax, income tax, generation-skipping transfer tax, and property tax. One example is the "Executor's Fee." While the executor of a Louisiana is entitled to an executor's fee of 2.5% of the estate assets, an analyses must be made about whether to accept the fee. The fee is a deduction from the estate for federal estate tax purposes, but it is included in the taxable income of the executor. Work with a lawyer or law firm that understands the various tax consequences of settling an estate.
5. Failure to properly document "Usufruct" assets. When a married person dies, he often leave his surviving spouse the usufruct of assets in his estate. If his wife inherits the usufruct, she is going to be accountable to the naked owners when the usufruct later ends. Proper documentation of usufruct assets at the time of death AND proper documentation of the subsequent sale of those usufruct assets is a MUST to avoid complications at the end of the usufruct (which typically is when the surviving spouse dies) and the heirs of both spouses squabble over those assets. Work with a lawyer or law firm that understands the usufructuary accounting and can provide you with the necessary guidance so that the estate settlement goes smooth not only when the first spouse dies but also when the surviving spouse dies.

Mistakes are often made in estate settlement legal proceedings because most executors and heirs don't go through this very often, so they don't comprehend the consequences of a mistake. If you are the executor of an estate, or your loved one died recently with no Will, give us a call at 866-491-3884, and we'll help you develop a plan to get the estate settlement done quickly, easily, and without stress. We provide legal services for Successions in all 64 Louisiana Parishes. Call today!

Joint Tenants With Rights of Survivorship: What it Means in Louisiana

 

The following story is a trap where unknowing families often wind up paying hundreds of thousands of unnecessary estate tax dollars. I was working with a family where Dad died a few weeks ago and the family was doing a lot of things on their own. Dad had some IRA's that went to the surviving wife. They were able to do all of that paperwork with the financial institution because she was the designated beneficiary. They also had an account that had about a million dollars in it and was titled, "Dad and Mom, Joint Tenants with Rights of Survivorship." Now, that's a form of title that Louisiana simply doesn't recognize. However, they had that account and as far as that investment company knew, if it was titled that way and Dad died, they were going to put the account in Mom's name. That's exactly what they did. Mom has all of the money and they felt like we didn't even need to address that account. Dad's last will and testament said that Dad gave Mom the lifetime usufruct of his estate. So I told them how really important it was to document that account and put it in as a succession asset and itemize everything in that account because if it was left how it was then when Mom dies in the future it was all going to be in Mom's estate. This could be a lot of unnecessary estate tax creating a large estate for Mom. However, if we document everything correctly now by documenting what Dad's estate was that Mom had the usufruct of Dad's half of the community property, then those things that Mom had the usufruct of won't be counted as part of her estate for estate tax purposes when she dies. A lot of financial institutions just let Mom put everything in her name, but it's really important for estate tax avoidance purposes to document what's in the estate of the first spouse to die so that it gets excluded from the estate of the surviving spouse.  So make sure you take care of all those things.

Family Home to One Child After Louisiana Probate

 

I want to talk to you today about a common scenario that happens in Louisiana when a parent dies and their home goes to the children but the children decide they only want one of their siblings to own the home. I'm working on two of these successions right now.

 

Here's the way you have to do it. Again the scenario: parent dies and the home goes to the children. The children agreed that one sibling will own the home. You have to do the parents succession because the first thing that needs to get done is to transfer the home from the parents name to the children's name. The second step is the children can either donate or sell their share of the home to the child that will own the home entirely. The children will agree to donate it to their sibling or sometime the siblings will have an agreement to buy their shares from each other. However, you do have to complete the parent’s succession first to get the property out of the parent’s names into the children’s names.

 

This is just another succession story. Be aware that anytime someone dies with something titled in their name, they have to do a succession.

Re-Opening a Louisiana Probate

 

 

We were working with a family the last couple of days whose dad died two years ago. Dad left everything to Mom so they did the succession after Dad passed away.  Well, after they finished that succession they found another couple of assets that were still in Dad's name. There was a bank account that was still in Dad's name and in fact, there was an Allstate refund check for about $20,000 that was payable to Dad's estate that they had never taken care of. So what we have to do is re-open Dad's succession. We will get one of the children appointed as the administrator because his surviving wife is now passed away. So the child will be appointed as the administrator, open an estate bank account and then she'll be able to collect those funds from the frozen bank account and should be able to deposit that Allstate check payable to Dad's estate. Then with all of the proper court authorities and court orders, the daughter will have the authority to pay any extra bills and divide all that money among the heirs.

 

So just know that under certain circumstances we sometimes have to go back and re-open a succession either to correct things or because additional assets were found after the succession or probate was concluded.

Louisiana Probate and Usufructuary Bonds

 

 

I was working on a succession recently and I want to make you aware of what is called a usufructuary bond. Mom had written her own hand-written will, which isn't very common. She gave her husband the usufruct of her estate which is common and she named her children from a prior marriage as the naked owners. She passed away and she gave her husband the usufruct. However, because her husband was not the parents of her two children, those children forced their step-father to post a bond. They have the right to do this since he is not their parent. About every three years, he has to pay an insurance company $13,000 to purchase this bond. This bond is security for the children in case he squandered away with all the assets over which he had usufruct.

 

The point here is she wrote a hand-written will and she didn't know that she could waive this bond for her husband so her husband wouldn't have to write a $13,000 check every three years to the insurance company. So be aware of a usufructuary bond which often applies when you leave usufruct to a spouse and that spouse is not the parent of the naked owners. You can get around all of this with a will worded just right.

 

Paul A. Rabalais

What Assets Are Frozen When You Die?

 

I want to talk to you about a Louisiana probate today and what assets are frozen when someone passes away. Really, all the assets that you have get frozen when you pass away until the succession process gets under way. No one can access any of your bank accounts or investments or sell your real estate.

Typically the way those things get unfrozen is if you have a will, the executor will get confirmed and if you don't have a will, the court will appoint an administrator. It's going to be that person's job to open an estate account, gather your assets and move them into the estate account. From there, they will pay your bills and ultimately divide those assets among your heirs.

Initially though, everything is frozen. The power of attorney no longer works as it terminates when you die so everything is frozen requiring you to go through the Louisiana probate or succession procedure. Make sure you get the right person in charge to handle all those assets until ultimately they are distributed to all of your heirs.

Louisiana Executor Compensation

 

I want to talk to you today about a topic that comes up on occasion with successions. It's about executor compensation. When a person writes a will, they name their executor which is often a spouse, adult child or relative. Unless there's something in the will expressly providing for the amount of compensation the executor is is entitled a fee of 2.5% of succession assets according to Louisiana law.

 

The gentleman I was speaking with yesterday had a relative pass away and he was named as the executor. There was a specific dollar amount that the person who wrote the will designated for an executor so he is bound by that. This was a little bit unusual.  It's common for people to name an executor but it's not common to designate the executor’s compensation.

 

Just be aware of the executor’s fee when planning for things if you're involved in a succession. Sometimes it's waived because the executor's fee is subject to income tax and the inheritance is typically not subject to income tax. If you're starting as an executor of a succession and need some help, give us a call and we will help walk you through the process.

Louisiana Succession: Surviving Spouse Sells Home

 

I was working with a family last week who were a little confused about usufruct. The husband died, the husband and wife had 5 children and the husband died without a will. Since he died without a will we have to re-title the house in the succession in a way that the surviving wife will continue owning her half of the home and she will inherit the usufruct of the husbands half of the will last until she dies or remarries. The 5 children are the naked owners of his half of the home.

Let's say sometime in the future the home needs to be sold. It will take the participation of all 6 of them to sell the home. The wife will sign and the 5 children will sign at closing. Let's say the home sells 5 years from now for $200,000. Who gets the money? The surviving wife gets all the money. She owns $100,000 of it and has the usufruct of $100,000. Now she has a usufruct of money instead of the house. When mom either dies or remarries, that is when she will owe the children $100,000. So she does whatever she wants to with the $200,000 but she has this "debt" that she's going to owe the children.

That's a lot of stuff about Louisiana usufruct. If you're involved in a succession and would like us to help, just give us a call.

Why All Heirs Must Cooperate in a Louisiana Succession

 

I spoke with a gentleman yesterday who has been struggling for years to get successions done for a parent and a step-parent. The problem has been not all of the parties being on board.

The way our Louisiana succession system is set up, things can get done very quickly if you can get all of the heirs together, communicating and in agreement on what has to take place. Problems surface when there is a party not willing to communicate or agree. Things shut down and successions may never get done. In our office, we only handle successions where we can get everyone involved from the start.

If you are concerned about all of the necessary parties cooperating when a family member passes away, attempt to open the lines of communication and get everyone on the same page to create a plan to get things done. If there is someone being uncooperative, you have to work on that from the start.  You really need everyone working together in order to get things done.

If you need any help with this, our office would be happy to work with all parties involved in the succession.

Paul Rabalais

Three Handwritten Wills - Can We Use One?

Met with a lovely lady and her daughter this week. They were somewhat in a panic because they had no idea to do with their situation. A gentleman had recently passed away. Mom and her daughter brought in what they said were "three Wills." The first was written in the deceased's own handwriting, signed and dated. The second was written by daughter at the deceased's request when the deceased knew he was dying. The final will was written by Mom a little later. Which one do we use?

Pretty easy. The later two were invalid. I explained to Mom and her daughter that Louisiana, generally, recognizes two forms of Wills - notarial and olographic. None of the wills were notarial because they did not contain the necessary language nor were they notarized properly. The first Will qualified as an ologrpaphic will because it was in the handwriting of the deceased and the deceased had signed and dated it.

I was a little concerned with some of the wording the deceased used (btw - don't write your own Will unless you want to watch your loved ones go through a mess from above - or from below).  There were other issues - we actually have to do multiple successions because part of the property was never properly put in the name of the deceased, so we have to do his mother's succession too, but we are knocking it out and everyone is pleased that we are resolving this.

While this family is holding up well going through this difficult time, it would have been easier if the deceased had contacted us long before he died to get his affairs in order. It would have made things easier and less stressful for the loved ones he left behind.