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.

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.

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

Estate Planning for Louisiana Parents with Minor Children

Twice in the past week I took care of friends of mine who wanted and needed to get their estate plan in order for the first time. Both friends had minor kids, and both friends had never done any estate planning before.

Estate planning for parents with minor children usually looks something like this:

1. Lifetime Usufruct to Spouse. Parents with minor kids in Louisiana usually leave their spouse the lifetime usufruct of their estate. In Louisiana, you really can't leave your estate in full ownership to your spouse because forced heirship laws require you to leave part of your estate to your kids 23 or younger. The usufruct satisfied these forced heirship rules because you are not leaving out your children - you are leaving them "naked ownership" which permits them to inherit from you after you AND YOUR SPOUSE die.
2. Children's Inheritance In Trust. If you and your spouse die, you don't want your minor/young child(ren) to inherit it all in a lump sum. So, we often create a "testamentary trust" in your will whereby you name a trustee for your kids to manage their inheritance until they are older, and you designate a term (age 25 perhaps) when your kids can have their inheritance.
3. Tutors. If you have minor children, you will name their guardian who will play the role of parents if you die before your children are 18
4. Powers of Attorney. You will likely designate your spouse as your Agent on your Durable Property Power of Attoreny and your Health Care Power of Attorney. If your children are young, you will likely name a trusted relative or friend as the alternate agent if your spouse is unable to act as your agent.
5. Living Will Declaration. You will likely document your wishes regarding life support machines.

These are typical items that parents with minor children address when they are setting up their estate planning legal documents. There are other issues that often come into play but these are the basics. If you live in Louisiana and want to protect your minor children (of course you do!), let us know. We often can get all of the necessary information over the phone or through email, or if you come into the office we can often complete all of the documents during your first visit to our office since we use technology so well.

Have a great day! Paul Rabalais

Bequests to Grandchildren Should Be Left in Trust

Been working with two different families over the last day or two regarding their estate planning. They are both leaving significant bequests to grandchildren - for different reasons that I don't need to get into.

If you leave a significant amount to grandchildren or to others who are young (it's up to you to determine what is "significant" and it's up to you to determine what is "young"), then you should leave that bequest in trust.

Why leave it in trust for them? Three reasons mainly:

1. You can dictate when the grandchild has access to the money. You can state that the grandchild can have it at a certain age (25 for example), or in stages (half at 25; remainder at 30), or you can give your trusted trustee the discretion regarding when the grandchild gets the inheritance.
2. You can dictate what the money is to be used for. Many trusts for grandchild are general in that they state in the legal documents that the trust principal can be used for the "health, education, and welfare" of the grandchild. Some trusts get more specific. Be careful when you start getting specific because you can't know your grandchild's future circumstances or needs.
3. You can dictate who controls the grandchild's inheritance. In your trust you will designate a "trustee" who is in charge of managing and investing the grandchild's share while it is "in trust." The needs to be someone you "trust" (no pun intended). You should also select an alternate trustee or a method for determining an alternate trustee.

Grandkids who are inheriting need to be protected from themselves. A bequest to a grandchild can be something that enables your grandchild to have a tremendous head start on life, but if it is not set up right, it can do more damage than it does good.

If you live in Louisiana and would like to discuss setting up trusts for your grandchildren as the ultimate gift to them, feel free to contact us for a no-cost initial call/visit.

Paul Rabalais

Designating Where Your Childless Children's Inheritance Goes

Have been working with a couple the last few days. They have accumulated assets over their lifetime and they want to make sure that their descendants benefit from it the right way. They have children who are not married, do not have children, and it is anticipated that those children will never have children.

Our new clients expressed concern that if these "childless children" inherit, then when these children die, the inheritance might get passed along to a spouse or perhaps a total stranger. This couple wanted these assets to "stay in the family."

So, we will create trusts for these children. For example, we might set up the "Joseph Trust" and the "Linda Trust" figuratively speaking. Joseph and Linda, are the two hypothetical childless children. The trust instruments provide that when these children die, any remaining trust assets will be divided among this couple's grandchildren.

One benefit of using trusts allow you to do some "controlling from the grave." But you must be careful - our Louisiana Trust Code has particular rules regarding what you can and  can't do. Make sure you consult with the expert - don't try this at home!

Paul Rabalais