The Rabalais Law Firm's La. Estates Blog

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

Using Louisiana Trusts To Protect From Future Creditors

I've had a number of inquiries lately about how people can protect their assets just in case they get sued and someone gets a big judgment against them. In case you haven't heard, we live in a litigious society.

Some people call this, "Asset Proection." But Asset Protection is a broad term. Some people call protecting assets from nursing home expenses, "Asset Protection."

For purposes of this post, I'll be referring to Asset Protection as basic things one can do using Louisiana trusts to protect one's assets from being siezed in case you get sued and someone successfully obtains a large monetary judgment against you.

In general, the Louisiana Trust Code provides that your creditor can sieze only:

1. Your interest in trust income or trust principal that you may voluntarily alienate; or
2. Your interest in trust income or trust principal to the extent that you donated property to the trust, directly or indirectly.

Most trusts are - and should be - "Spendthrift Trusts." Language in the trust instrument that a beneficiary's interest shall be held subject to a "spendthrift trust" is sufficient to restrain alienation by a beneficiary to the maximum extent permitted by the Louisiana Trust Code.

Let's say, for example, that you transfer your house to an irrevocable spendthrift trust for your children. From a tax standpoint, you will lose your property tax homestead exemption, and you will likely lose the ability to sell the house without incurring capital gains tax. The house may be exempt from your future creditors and your children's future creditors. Since you are not a trust beneficiary, it is protected from your creditors. Since your children cannot alienate their interest in the trust, and because they did not donate property to the trust, the trust assets are protected from your children's future creditors.

If you have questions or need help with Estate Planning in Louisiana, here's what you do:

• If you have general questions about estate planning in Louisiana, post a comment to this post. I check for comments daily and will be happy to respond to your comment. Other readers may also be able to share similar experiences.
• If you would like to inquire about retaining our law firm to assist you with estate planning, you may email me (paul@rabalaislaw.com - put "Need Estate Planning Help" in subject line), or you can call our office at 225-329-2450.

Until next time...

Paul Rabalais

Nonspouse Beneficiary of Retirement Account

Was contacted yesterday from someone who wanted to know if their spouse would be required to sign a Consent if my friend wanted to know someone other than her husband as the beneficiary of her IRA.

401(k) rules and IRA rules are different. Last time I checked, this was the deal:

• If you are a participant in a 401(k) plan, and you want to name someone other than your spouse as beneficiary, then you must get your spouse to sign a Consent form. The rationale is that the spouse is giving up an ownership interest in your 401(k) plan.
• Louisiana law provides that an IRA owner can be permitted to name a non-spouse beneficiary, and the spouse's consent is not required.
• Some financial institutions, though, still require their IRA owners to obtain consent from the spouse when the IRA owner names a non-spouse beneficiary.

If you own an IRA and want to name someone other than your spouse as the beneficiary, and either your spouse won't consent, or you don't want your spouse to know about it, then you may need to look around to find an IRA owner that will permit you to do this.

I asked a friend of mine, Marcel Dupre, who owns WealthPlanners. He said his company permits IRA owners to name a nonspouse beneficiary without requiring the consent of the spouse.

Anybody else out there have any comments on this issue??

Minor To Major Child

As many of you may know, my wife and I have five children, four sons Andrew, Taylor, Connor, William, and our daughter, Anna Claire. 

When people tell me how important it is for parents of minor children to have Wills, I tell them they are preaching to the choir.

Well as of today, my oldest child is no longer a minor - it's his 18th birthday. We've been celebrating all day today. Anna Claire made him a giant Happy Birthday poster. He already opened a few of his gifts - iPhone car charger, Smoothie King gift card, clothes, cash. Tonight he's going to a friend's house for his party where they'll eat a ton of Raising Cane's chicken fingers along with a cake his friend made him. Happy Birthday Andrew!

It's still as important as ever for parents with minor children to create an estate plan. Name guardians for your children; name trustees to manage their inheritance until they are old enough to do it themselves, and designate your executor, power of attorney, and make a living will.

Paul Rabalais

Nine Ways To Avoid Estate Disputes

Estate disputes are never fun. I sat down recently and wrote out nine things that you can do to help make sure that your surviving loved ones don't end up in a battle over your estate. Here they are:

0. Current Legal Documents. Make sure you have an up-to-date Will or Trust that thoroughly and accurately express your intentions regarding the settlement of your estate. An ambiguous or poorly drafted legal document can cause heirs to argue about the legal effect of ambiguous language in documents.
0. List of Assets. Maintain an accurate list of your assets and debts - and update it annually. Many estate disputes arise because surviving family members are not aware of what the deceased owned. Maintaining an accurate listing of your assets can prevent mistrust between your executor and your heirs regarding the Sworn Detailed Descriptive List that will be filed at the courthouse after your death.
0. Communication. Communicate to your heirs about why you are doing what you are doing. While your Will often provides who gets what, your Will is not the place to document "Why" you are doing what you are doing. Communicate to your heirs why you are doing what you are doing. You can speak to them, write them an informal estate planning letter, or even make a video. If all of your heirs understand why you did what you did, it may make them less likely to contest the settlement of your estate.
0. Your Executor. Select an appropriate executor or trustee. Some parents feel that they must designate their oldest child as their executor. You should select the most qualified person for the job, whether or not it is your oldest child. The executor's job is to gather all of the assets, determine what, if anything needs to be sold, communicate with the heirs regarding the settlement of your estate, follow the Louisiana Succession Procedural rules, work with our office to make sure all legal matters are handled promptly, and ensure the disposition of your estate in accordance with your wishes as expressed in your last will and testament. Often this job is easy, but when an estate gets contested, it's best to have an executor that can handle the responsibilities that are involved.
0. Your lawyer. Form a relationship with a lawyer or law firm that can help you and your surviving loved ones. Estate planning is not a one-shot deal. As laws and family circumstances change, it's important to work with a professional you trust that can help you during your lifetime, and then help your surviving loved ones when you are gone.
0. Personal Effects. Provide for the disposition of your personal effects. If you leave things equally to your two children, it will be simple to divide your money and financial assets into two equal parts, but it may not be so simple to divide the family heirlooms. Often these family heirlooms have little fair market value, but have tremendous sentimental value. Clearly communicate to your heirs prior to your death how you want your personal effects handled. It's a shame when family members permanently stop speaking because of an argument over the disposition of personal effects.
0. No Contest Clause. Include a "No-Contest Clause" in your Will or Trust. In Louisiana, the validity of these no contest clauses are limited, but there may be no better way to discourage estate disputes than to insert a No Contest clause in your estate planning documents. This important provision discourages estate disputes because it provides that an heir who contests certain matters will not be entitled to receive an inheritance. No Contest Clauses are gaining both acceptance and popularity. In the near future, we will be sending you information about including this important provison in your documents. Stay tuned.
0. Your Will. Make the existence of your Will known. Disputes often arise because of the uncertainty that a Will exists, or because they think that "Dad may have updated his Will." You should let your heirs know that you have a Will or Trust, and even let them know if you change it.
0. Beneficiary Designations. Update your beneficiary designations. It's great that you have an up to date Will or Trust, but if your life insurance still names your ex-wife as the beneficiary, then you are asking for trouble. Make sure that your life insurance, IRA, and annuity beneficiary designations are consistent with your overall estate plan.

If you do these things, it's much more likely that your estate settlement will run smooth. Can you think of anything else you could do? Feel free to post your comments.

iPhone post

Thought I'd show you a picture of our office building. The photos and text were done entirely from my iPhone.