Paul Rabalais' Louisiana Succession Law Blog

Tax Implications for Trust Distributions

The other day a client confronted me with their concerns over tax implications from distributions made out of a testamentary trust (a trust created at the death of the trust creator). The answer to this question is actually quite simple. 

Distributions of principal from a Trust, whether that trust is a Revocable Living Trust, Irrevocable Trust, or Inheritance trust created in the will are not subject to federal income tax. These distributions are treated just as an inheritance or a gift would be treated from a tax standpoint.

The only tax that may come up for distributions of the trust principal would be a capital gains tax. This would be taxed if any property in the trust has appreciated in value from the time of the trust creator's death and is thereafter sold by the beneficiary or person receiving the trust distribution. 

Please also be aware that income off the trust assets, such as interest or rents, which accrues during the life of the trust is taxable income when it is distributed to the income beneficiaries.

If you are interested in trusts or other matters concerning your estate give me a call in the New Orleans/Metairie Area at (504) 247-1980 or send an email to chris@rabalaislaw.com. On the Northshore, contact Brent Durham at (985) 246-3020 or brent@rabalaislaw.com. In Baton Rouge, contact Paul Rabalais at 225-329-2450 or paul@rabalaislaw.com.

Chris Kane, Attorney

Director, New Orleans Office

        

 

Louisiana Small Successions

As I was studying for the bar exam, there was one area of estate law that was only briefly touched upon, and seemed rather insignificant in the whole scheme of things. That seemingly insignificant Louisiana Code provision dealt with small successions. I figured, I’ll never see this in my legal career so I didn’t study the law regarding small successions with too much vigor.

Well low and behold, last week we met with a client who’s father recently passed away and was eligible for the Louisiana small succession. The client was looking to open his father’s succession and was prepared to pay the high cost of opening the succession with a court filing. It turned out that, because his father’s estate was eligible for a small succession, no court filing was necessary and the cost of opening succession was avoided.

To be eligible for a small succession a person must die without a will, and their estate must be worth less than $75,000. To open a small succession all that is needed is a notarized affidavit declaring the individual’s death and that the estate’s value is less than $75,000. With this affidavit the heirs of the decedent can gain access to the deceased’s accounts without any hassle.

The reason this estate qualified for a small succession lies in proper planning because the father placed the majority of his estate in trust prior to death, ad the remainder of the estate ended up equaling less than $75,000.

As you can see, proper planning can save a lot of money upon death. If you are interested in our estate planning services to help your family save on the cost of successions feel free to call or email me in the New Orleans/Metairie Area at (504) 247-1980 or chris@rabalaislaw.com. On the Northshore, contact Brent Durham at (985) 246-3020 or brent@rabalaislaw.com. In Baton Rouge, contact Paul Rabalais at 225-329-2450 or paul@rabalaislaw.com. We will also be holding free seminars in Metairie on November 16 and Mandeville on November 17 to educate people looking to protect their estate and assets from estate tax and probate costs. Go to our website, www.EstatePlanningInLouisiana.com for more details and to register for this great event.

Chris Kane, Attorney

Director, New Orleans Office

        

Why Lawyers Have a Bad Reputation

Jersey lawyer Richard Weiner got in trouble when he wrote the following touching letter to families of seven airplane crash victims:

"I read of your catastrophic loss and though I don't know you personally, I want to send you my condolences. When I looked into the crash, I became very upset when I realized this accident should have never occurred except for the gross negligence of the airline and various other defendants including the Port Authority of New York and New Jersey."

CAN'T YOU JUST FEEL THE SORROW IN HIS LETTER? Paul

Minor Child Can Not Be Beneficiary of Life Insurance

We received a call today from a gentleman who was calling for advice about a minor child who was named the beneficiary of a life insurance policy. The parent had died and left life insurance death benefits to the minor child.

Everytime I hear about a minor child who is the beneficiary of a life insurance policy, IRA or 401(k), I cringe and I think "messy complicated tutorship" which could have been avoided.

Here's what will happen:

• The life insurance company WILL NOT pay life insurance proceeds to a minor child.
• Two people will have to hire a lawyer to petition the court to designate a tutor and an undertutor for the child.
• The judge will make its designations. Hopefully there is no opposition to the petitioners' request that they be appointed.
• Then, the life insurance company will pay the tutor and hopefully the tutor will protect the money.
• If the tutor needs to spend some of the money, the tutor must petition the judge for authority to spend the money.
• Every year the tutor must file accountings with the court showing the judge what the tutor did with the money.
• When the minor turns 18, the tutor must dump all the money into this 18 year old's lap.

You may be thinking, "There's got to be a better way!"

Well, there sure is. The owner of the life insurance policy should have set up a trust to serve as the beneficiary of his life insurance. This could be a stand-alone insurance trust, or it could be a testamentary trust which is part of his Last Will. Then, the life insurance company will pay the trustee who will not need to report to a court at any time, and the funds won't be dumped into this child's lap on his 18th birthday.

If you have a minor child who might one day be the beneficiary of life insurance, or a retirement account or receive other assets as an inheritance, you'd better hurry along and make sure those assets would go in trust for your minor kiddies. This may be the most important thing you ever do for your children.

If you'd like to set up a no-cost initial legacy planning visit, contact one of our three offices: Baton Rouge (paul@rabalaislaw.com), Mandeville (brent@rabalaislaw.com) and New Orleans (chris@rabalaislaw.com). Or, call us toll-free at 866-491-3884.

Independent Estate Admininistration in Louisiana

Last week we encountered a client who was trying to get the succession for their father's estate completed. The father's will was created over 15 years ago in 1995 and was governed by the laws of Louisiana. Overall, the will was pretty standard with the exception of one detail. The will named one of the testator's children as an "independent executor". The odd thing is, this will was created before Louisiana ever recognized what is known as independent administration of a will. Louisiana only began allowing for independent administration in 2001. As you can imagine, myself and my associates were all surprised to see this term in any will created before 2001. Whether it be the extraordinary foresight of the will creator or just a stroke of luck, this "independent executor" term had a great effect on the ease with which the succesion could proceed.

Typically, all wills name an executor. The executor is the person who manages the estate's administration during the succession or probate of the will of the deceased. Administration can include selling estate assets, disbursing estate property, and other various management functions with regard to the estate. When an administrator or executor is not designated and approved as "independent", they must get a court order to take any action with respect to the testator's estate property. The process of getting court approval for all these management activities is cumbersome and could also be costly as court filing fees can quickly pile up.

When an executor is approved as an independent executor, they can take all of the aforementioned management activities without any court involvement. So clearly, independent administration is the way to go in Louisiana because of the ease it facilitates with any succesion. At the Rabalais Law Firm, we make sure to always include this "independent executor" language in every will we create and we will always seek to have an independent administrator or executor approved whenever we deal with a succesion.  If you have a will created prior to 2001 which most likely does not include the "independent executor" term it would be a good idea to update your will to reflect the changes in the law and any changes in your present circumstances. If you are encountering a succesion proceeding, then you will certainly want to have an independent executor or administrator approved to move the process along more quickly.

If you would like to speak with me or one of our other attorneys regarding a will or sucession feel free to call or email me in the New Orleans/Metairie Area at (504) 247-1980 or chris@rabalaislaw.com. On the Northshore, contact Brent Durham at (985) 246-3020 or brent@rabalaislaw.com. In Baton Rouge, contact Paul Rabalais at 225-329-2450 or paul@rabalaislaw.com. We will also be holding free seminars in Metairie on November 16 and Mandeville on November 17 to educate people looking to protect their estate and assets from estate tax and probate costs. Go to our website, www.EstatePlanningInLouisiana.com for more details and to register for this great event.

Chris Kane, Attorney

Director, New Orleans Office

        

Secrets to Avoiding Estate Tax & Probate

 

Our firm is proud to announce the opening of two new offices in Mandeville and New Orleans. We will be serving new clients in those areas starting on November 15, 2010. To kick off our grand opening, we will be hosting a seminar on Secrets to Avoiding Estate Tax & Probate in 2 locations:

Metairie – Tuesday November 16, 2010
10:30-11:30 a.m. or 6:30-7:30 p.m.
Four Points Sheraton
6401 Veterans Memorial Blvd.
Metairie, LA 70003

Covington – Wednesday November 17, 2010
10:30-11:30 a.m. or 6:30-7:30 p.m.
Courtyard Marriott
101 Northpark Blvd.
Covington, LA 70433

At this one-time free event, you will learn how to:

• Avoid federal estate tax in 2011 and beyond.
• Avoid the delays, lawyer fees, court costs, and public nature of a Louisiana probate
• Leave a legacy of values to your family.
• Choose between a Living Trust and a Last Will

We have several outstanding testimonials from satisfied clients. I will mention a few in this post but you can always check our website, www.EstatePlanninginLouisiana.com to view more.

"My husband and I both admire Mr. Rabalais, not only as a very knowledgeable, prompt estate lawyer, but a true Christian, compassionalte person. He handled Lynn's estate and my Will i na very calm and clear manner, not to speak of very good advice to those of us not accustomed to estate matters. I highly recommend him to any one, and have done so many times."                           -Joanne Brassett 

"I attended Paul Rabalais' estate planning seminar several years ago and I procrastinated about making an appointment. I was very impressed with Mr. Rabalais' knowledge of the law, but I was fearful that the process would be confusing and time-consuming. I recently had Mr. Rabalais create a will, power of attorney, and a living will for me. He and his staff were extremely knowledgeable, kind and professional and he gently guided me through the process thoroughly explaining each action. For a wonderful peace of mind, I would highly recommend the Rabalais Law Firm to you."
                                                                                                   -Elizabeth Ginn

There are three ways to register for this free event:

1. Call Toll Free at (866) 491-3884
2. Register Online at www.EstatePlanninginLouisiana.com or register on this blog
3. www.facebook.com/RabalaisLawFirm

Registration is required. Seating is limited. Please arrive 10 minutes early. Refreshments will be served.

To Register for the New Orleans location please fill out the form below:

Person Information
First Name *
Last Name *
Email *
Phone 1 *
Time Attending *
Number of Guests *

To Register for the Covington location please fill out the form below:

Person Information
First Name *
Last Name *
Email *
Phone 1 *
Time Attending *
Number of Guests *

This will be a very special event that won't be offered again. I encourage everyone who can to please attend and learn how to protect your family's legacy. We are expecting a full house so please register quickly. I look forward to see you there.