Paul Rabalais' Louisiana Succession Law Blog

Needing Children and Their Spouse's Cooperation When Mom Dies Without a Louisiana Last Will

 

 

I was a working with a super nice gentleman yesterday, John, whose wife died several years ago. John recently remarried and he never did a succession after his first wife died. I explained to John the Louisiana rules that apply when a married person dies without a Will. Since his wife died without a will, John inherited the usufruct of his wife's half of the community property. However, when he remarried, his usufruct, or his right to use those assets, terminated. So, his children are now the owners of his wife's half of the community property since he remarried. We had a long discussion and he has a great family and great kids who are very cooperative and supportive. He is trying to sell some things that are in his wife's name but he can't because they're frozen. We have to do the succession and transfer his wife's half of everything to the children first now since he has remarried. Then the children are going to sign some paperwork donating their one-half of John and his wife's property back to John so he can own the whole thing. John also has some special requests for when he passes away about his current wife being able to live in the home. The key is that he's fortunate he has cooperative and supportive children because he would be in a bit of a bind since he remarried and he has no right to any of his wife's community property. The lesson here is to plan this stuff in advance, get the legal documents done and then when somebody passes away, make sure you do what you need to do to get things transferred.

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.

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

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.

How To Handle a Lost Will and Unfunded Living Trust

I met with a gentleman this past Thursday. He had emailed me the night before inquiring about how to get a Judgment of Possession because his investment firm told him he needed a Judgment of Possession before they would turn over his deceased wife's investment account to him.

After we talked on the phone for a few minutes, we determined it would be best if he collected all of his wife's important papers and then he would bring them in for me to review. He mentioned he had a trust prepared in another state years earlier before moving to Louisiana.

At any rate, he came in with all of his papers including his revocable living trust he and his wife established in Missouri, along with a copy of her Last Will. We quickly determined that none of his assets were titled in the trust's name, and we determined that he could not find her original Last Will and Testament. He had a copy, but it was not a copy of her signed document. Her signature was not on the copy.

First thing I said was, "I realize you set up this trust to avoid probate and make it easier upon a death, but your trust does not accomplish this because none of your assets are titled in your trust, so we have to go through probate to get the assets out of her name."

Second, we realized that we would have to treat this scenario as if she had no Last Will, and use the Louisiana intestate laws to move the assets out of her name. I showed him our sample Louisiana Succession, and I explained how he would continue owning his half of their assets, and how he would inherit the usufruct, until his death or remarriage, of her half of the assets, and their children were inheriting the naked ownership of her half of the community property.

Next week he will be signing all of the succession documents and all of his new estate planning documents so that his wife's estate can be settled, and it will be easier for his kids to manage his estate if he becomes incapacitated, and it will be easy for them to settle his estate when he is gone.

Take a peek every now and then and make sure you have your original estate planning documents, and also make sure that if you establish a revocable living trust to avoid a probate or a Louisiana Succession, you have "funded" your trust and transferred your "probate assets" to your trust during your lifetime.

Paul Rabalais

Spousal Usufruct Only Applies To Community Property

Here in Louisiana, we have a fairly  unique property system for spousal unions. Louisiana is what's known as a community property state. Community property means that you and your spouse each have a 1/2 ownership interest in most of the property acquired during your marriage.

When one spouse dies leaving children and no will, the children get naked ownership of the deceased spouse's 1/2 share of community property, but the other spouse inherits the right to use the property left to to the children. This use right is called a spousal usufruct, and this right lasts until death or remarriage under Louisiana Estate Law.

However not all property owned by married persons in Louisiana is considered community property. Property that a spouse inherits during or before the marriage, property owned by one spouse prior to marriage and any property acquired with funds that were not earned or received during the marriage are considered separate property. In a Louisiana Succession, the court will determine which of a deceased souses assets are considered community property and which assets are separate property.

With separate property, your children will inherit that property in full as long as they are 18 years of age or older. Your surviving spouse has no right to use your separate property under Louisiana Law.

A well drafted estate plan can provide your spouse with more rights than the law allows. For this reason it is a  good idea to seek out the help of a professional to protect you spouse where Louisiana law fails to do so. To discuss your estate planning options in New New Orleans, Metairie, Kenner, the Westbank, Slidell, Madeville, Covington, and other areas of Southeast Lousiana; call me at (504) 274-1980 or email chris@rabalailaw.com.

 

Chris Kane, Attorney

Director, New Orleans Office

     

 

8 Things to Know About Louisiana Successions

People often call our office after a friend or family member has passed away wanting to know more about successions in Louisiana. Below is a general explanation of our unique, and sometimes complicated, law of successions.

1) When is a succession “opened”?

• The succession opens at the moment of death, and successors have immediate ownership of the property they inherit. This is regardless of whether the succession is actually filed with the Court, although a court order will usually be required for banks and other institutions to transfer funds, as well as for transfer of land ownership.
• While the succession is technically opened automatically, we DO NOT recommend that you forego filing the succession with the proper Court. Letting a succession go for several generations is a common problem in Louisiana that results in an extremely difficult task for the family member or friend who eventually has to deal with everything years down the road when paperwork has been lost and memories have faded.

2) What happens to a person’s community property if they die without a Last Will?

• If a person leaves behind a spouse and children, ½ of the community property will belong to the spouse in full ownership. The surviving spouse will have the usufruct of the other ½ of the community, and the children will have naked ownership. The spouse’s usufruct lasts until the spouse dies or remarries, whichever occurs first. Upon the spouse’s death or remarriage, full ownership of the ½ of the community that was subject to the usufruct automatically vests in the children.
• If a person dies leaving a spouse, but no children, all of the decedent’s property will pass in full ownership to the spouse.

3) What happens to a person’s separate property if they die without a Last Will?

• If they leave behind descendants, they inherit all of the property to the exclusion of everyone else, including a spouse.
  • In all areas of successions law, “descendants” include children that have been given up for adoption. They are still entitled to inherit from their birth parents.
• If they leave no descendants, but leave behind parents and/or siblings or children of predeceased siblings, the parents inherit the lifetime usufruct of the property and the siblings (or children of predeceased siblings) inherit the naked ownership of the property. (This is true unless the property is something the parent donated to the child. In this case, the property reverts to the parent in full ownership.)
  • If there are parents, but no siblings, the parents inherit in full ownership.
  • If there are siblings, but no parents, the siblings inherit in full ownership.
• If they leave no descendants, parents, siblings, or children of predeceased siblings, the property goes to the surviving spouse in full ownership.
• If they leave no descendants, parents, siblings, children of predeceased siblings, or spouse, the property goes to any surviving ascendants, such as grandparents or great-grandparents.
• If they leave no descendants, parents, siblings, children of predeceased siblings, spouse, or other ascendants, the property goes to any other collateral relations, such as great-nieces and nephews, great-aunts and uncles, etc.)
• If the decedent leaves absolutely no relations, the property will go to the state.

4) What happens to a person’s property when they die with a Last Will?

• After the Will is probated and the Judgment of Possession is signed, the property goes to whoever is named in the Will.
• What can’t a person give away in their Will?
  • A married person cannot give away more than ½ of their community property, because ½ of community is owned by the surviving spouse when the other spouse dies.
  • A married person can leave his or her ½ of the community property to anyone they wish, even to the exclusion of their spouse, but they must take into account forced heirship laws.
    • The part that the testator can will away is called the “disposable portion.” The part that the testator cannot will away is called the “legitime.” The legitime will be equal to either ¼ (if there is only one forced heir) or ½ (if there is more than one forced heir) of the testator’s ½ interest in community property.
    • Where forced heirship prevents alienation of part of the testator’s ½ of the community, the testator may leave the usufruct of their ½ to their spouse with the naked ownership of the legitime to the forced heir(s).
      • At the testator’s discretion, this usufruct can last until the surviving spouse’s death, remarriage, cohabitation with another person in the manner of married persons, etc.
      • The forced heirs’ naked ownership may be left in trust with the surviving spouse named as the trustee. This will allow the spouse to deal with the property without having to get permission from the forced heirs (such as selling the home or cars).  

5) What if a person doesn’t want the property they are to inherit?

• The successor may renounce the inheritance, but such renunciation must be express & in writing.
• The property will then go to whoever would have inherited if the renouncer had predeceased the decedent.
  • In the case of a succession where the decedent left a Will, the testator is allowed to say what he wants to happen to the property if it’s renounced or disclaimed by an heir.
  • The person who is disclaiming the property CANNOT say where they want the property to go. It is up to the testator, or, if they made no provision in a Will, to the law.

6) Who handles the succession when a person dies?

• In the case of a death without a Last Will, someone, usually a relative, will petition the court to be appointed as an administrator. This person may act independently if all of the universal and general successors sign agreements. This allows the administrator to act without court approval for everything. If the successors do not agree to independence, the administrator will have to petition the court to do almost everything. The most common thing for which a non-independent administrator needs to ask permission is to sell immovable property.
• In the case of a death where the decedent left a Last Will, the decedent will almost always have appointed someone to serve as executor. This person will usually petition the court to be confirmed as executor. On occasion, the person named does not wish to or is unable to serve as executor. In this case, a person named as an alternate executor in the Will may petition the court, or, if there is no named alternate, any other interested person may petition the court to be named as “dative executor.”
  • The executor may act independently if either the testator stated that was their wish in the Will or if all of the universal and general successors sign agreements.
• The executor or administrator is entitled to payment for their services in the amount of 2.5% of the net estate, unless the decedent provided otherwise in their Will. This fee can be waived, and often is in the case of family members. If the fee is accepted, it must be reported as income on the executor’s/administrator’s tax return.

7) What are some duties of the administrator/executor?

• After being appointed by a court, the succession representative is issued Letters of Administration or Letters Testamentary. These Letters are proof of the succession representative’s authority to deal with matters on behalf of the estate. One of the main things that must be done is opening an estate account.
  • This account may be opened at any bank with a branch in Louisiana. To open an estate account, the representative will need to present the bank with:
    • A copy of the death certificate,
    • A Tax Identification Number, and
    • A certified copy of the Letters
    • Once the estate account is opened, the representative will take a copy of the Letters to the banks and financial institutions at which the decedent had accounts. They will ask that the accounts be closed, and that checks for the balance be issued to the “Estate of John Doe.” These checks will then be deposited into the estate account.
    • The representative will use the estate account assets to pay estate debts, which usually include:          
      • Legal fees,
      • Executor’s/Administrator’s fees,
      • Administration expenses,
      • Funeral and burial expenses,
      • Unpaid medical expenses,
      • 50% of community debts due at death,
        • This includes utility bills, credit card debt, car loans, mortgages, etc.
        • 100% of separate debts due at death
      • The representative will need to maintain a list of these debts, along with the proper documentation.
      • The representative will also need to make a list of the decedent’s assets and the value of those assets on the day the decedent died.
        • The most common assets that need to be listed include:
          • Immovable property (real estate),
          • Bank accounts,
          • Accounts with other financial institutions, such as brokerage accounts,
          • Stocks,
          • Bonds,
          • Cars, boats, trailers, and other titled vehicles,
          • Promissory notes owed to decedent,
          • Business interests (LLCs, corporations, etc.)
          • Assets that do not need to be listed because they are distributed outside of the succession include:
            • Beneficiary designated assets, such as IRAs, 401Ks, and insurance policies.
              • This is only if a beneficiary is actually designated. If there is no designation, or if the beneficiary has died or disclaimed the assets, the assets will be included in the succession, because they will be payable to the estate.
              • Savings bonds in the names of Decedent OR another person.
                • Ownership of these jointly owned savings bonds is transferred automatically to the survivor.
                • If only the decedent is named or if both named persons are dead, the bonds must be listed in the succession.

8) Once all of the paperwork is completed, and the Judge has signed the Judgment of Possession, our office will record the Judgment in the parish or parishes in which any real estate is located. The succession representative will handle distributions to the heirs, transfers of vehicles, stocks, bonds, etc.

If you are interested in retaining our law firm to provide you with our estate administration legal services, contact us for a no-cost initial discussion at 225-329-2450, or email us at laura@rabalaislaw.com.

~ Catherine Martinez

 

One Child Inherits the Spouse After Both Parents Die - How To Do It

I've been working on a succession the last several weeks of a surviving spouse. Mom died a few weeks ago. Dad died back in 2002. Dad left the usufruct of his estate to Mom, and named their three children as naked owners.

Now that Mom has died, the three children would like one of the children to inherit the house as part of his inheritance from Mom and Dad. Can they do this?

One of the issues that will need to be addressed is that the three children inherited Dad's one-half of the house back in 2002, subject to Mom's usufruct. Now that Mom has died, the three children co-own one-half of the house (or I guess you could say that each child owns 1/6 of the house).

In order for the one child to fully own the house after Mom dies, not only do we have to structure the Judgment of Possession in Mom's succession to reflect that the one child is inheriting Mom's half of the house, but the other two children will have to transfer (sale or donation) their 1/6 interest in the house to the other child so that one child can own the house in full ownership.

The point is that after the surviving spouse dies, we often need to refer back to the succession of the first spouse to die when dividing family assets among the heirs.

If you are an executor of an estate and would like to discuss how we can efficiently provide our legal services to guide you through the settlement of a Louisiana succession of a deceased loved one, give us a call at 225-329-2450, or send me an email at paul@rabalaislaw.com

Paul Rabalais

Don't Sign Louisiana Succession Documents That You Will Regret Later

Here's the scenario that I've seen happen over and over in Louisiana: Dad dies - perhaps with a Last Will but more likely without. The children want to make things easy for Mom so they sign Succession pleadings in which they donate to Mom all of their interest in Dad's succession.

If they had not signed this Donation, then the children would have inherited Dad's estate subject to Mom's usufruct. The children - in donating everything to Mom - thought they were doing the right thing by allowing Mom to own everything.

So, what happens next? It happens every time. Mom remarries. When Mom later dies, everything goes to Mom's second husband - even the part that the children should have inherited from their father. The children get nothing because Mom left everything to Step-Dad. When Step-Dad later dies, Step-Dad will leave it all to Step-Dad's children.

Moral of the story: Be careful before you renounce or donate rights that you have in a Louisiana succession. While you think you are doing the right thing, you may be doing more harm than good. Once your refuse or donate your succession rights, you cannot go back and change your mind later. It's a done deal.

If you need assistance in handling a succession promptly and professionally, feel free to send me an email at paul@rabalaislaw.com.  Put in the subject line: NEED SUCCESSION HELP! I'll do my best to answer your questions and point you in the right direction. If you like what you see and hear from me, you may even want my office to provide you with our estate administration legal services. We'll give you a free quote for fixed succession costs.

Have a great day!