Estate Planning Law Firm of Louisiana

When are Grandchildren Forced Heirs in Louisiana?

Louisiana is the only state that has forced heirship. Forced heirship requires that children 23 or younger, or children of any age who are permanently incapable of "taking care of their persons or administering their estate," must inherit a portion (usually one-fourth) of their parent's estate. There are also two circumstances where your grandchildren would be forced heirs and required to inherit from you regardless of what you write in your Will: If your deceased child would have been 23 or younger when you die, then your deceased child's children are forced heirs. This does not occur too much. If, when you die, your deceased child has a child or children who are permanently incapable of "taking care of their persons or administering their estate," then those grandchildren are your forced heirs. There is a whole lot more to the Louisiana forced heirship laws than what I wrote above. I simply wanted you to know that there may be circumstances where grandchildren can be forced heirs. If you have any questions about this, feel free to comment to his post or send me an e-mail at paul@rabalaislaw.com. Thanks. Paul Rabalais

Understanding the Louisiana Surviving Spouse's Marital Portion

In Louisiana, when a spouse dies rich in comparison with the surviving spouse, the surviving spouse is entitled to claim the "marital portion" from the succession of the deceased spouse. While there is no concrete test, it is generally understood that if the deceased spouse's assets are more than five times the surviving spouse's assets, the surviving spouse will ordinarily be awarded the marital portion. So, how much does the surviving spouse get? If the deceased died without children, the surviving spouse gets one-fourth of the deceased spouse's estate; If the deceased died survivived by three children, the surviving spouse gets the lifetime usufruct of one-fourth; and If the deceased spouse died survived by more than three children, the surviving spouse gets a child's share in lifetime usufuct. In no event can the marital portion exceed $1,000.000 Example. Rich Husband dies (survivied by three children and Poor Wife) with $3,000,000 of separate property. He and Poor Wife have $1,000,000 of community property. His estate is $3,500,000. Her estate is $500,000. He has 7X what she has. She qualifies for the marital portion. In his Will, he leaves his entire estate to his children (or to anyone other than Poor Wife). She is entitled to the lifetime usufruct of $875,000. She must file a claim for this within three years of his death or she loses this right. If you have questions about a marital portion claim, post a comment or send me an e-mail to paul@rabalaislaw.com, and I'll see if I can help. Paul Rabalais

Children From A Prior Marriage? Protect Your Life Insurance

It used to be that the traditional estate plan was the one where you had a married couple and all of the children were born of that one marriage. Today, it seems that the majority of estate plans involve spouses - and one or both of them have had children from a prior marriage.

Worked with a couple today. One of their main concerns was to protect the life insurance - and their estate - for (1) their surviving spouse; and then (2) for their respective children.

Here's the problem. Husband dies and leaves his $1,000,000 life insurance policy to his wife. After Husband dies, Mom applies for and receives a check for $1,000,000 from the life insurance company. When Mom later dies, she leaves this money - and the rest of her estate - to "her" children. Husband's children are left with zippo.

What the solution? Perhaps Husband should have left the life insurance to a trust. Wife could be the trustee of the trust and Wife could use the principal for her maintenance and support. But the trust would provide that when Wife later dies, the trust principal reverts back to Husband's children.

Want to know how to protect your estate for your children from a previous marriage, just send me an e-mail to paul@rabalaislaw.com, or give my office a call at 225-329-2450. Make sure you tell my law firm's receptionist that you read about this on my blog. Until next time...

Paul A. Rabalais

Make gifts to your child - save $3.625 million in tax

Was working with a family this week. The parents want to do whatever they can legally do to avoid federal estate tax. We don't know what Congress will do with the estate tax in the future, but let's assume they keep it. Let's look at how much estate tax savings would result from making annual exclusion gifts to your child.

Let's say the parents are 50 years old. They start now by giving $24,000 annually to their child - or to an irrevocable trust for the child's benefit. Let's further assume that the child (or the trustee) invests the gifted funds and earns a 10% investment return. If the parents continue the annual gifting at $24,000 per year and die at the age of 85, and assuming the child or trustee continues investing the gifts, then when the parents die, the child (or the trust) will have assets totalling $7,251,508. If those assets would have remained in the parents estate - and if the estate tax rate was 50% - then the family saved over $3,625,000 in federal estate tax.

We work with people in our office who like avoiding tax. If you want to know how you can legally and ethically plan ahead and provide for your children and grandchildren, then give me a call at (225) 329-2450, or send me an e-mail at paul@rabalaislaw.com

Paul Rabalais

Teleseminar a Big Success

Hosted a teleseminar last Thursday to teach listeners the new Medicaid Eligibility Rules issued last month by the Louisiana Department of Health and Hospitals. I spend most of the teleseminar reviewing both the rules that have not changed, along with the important new rule changes. As expected, the important component now is to PLAN EARLY!

How early? Well, even under the new rules, you can protect your entire estate if you engage in the proper planning at least five years before you need Louisiana long term care Medicaid. If you don't have five years, you can still protect a large part of your estate using newly created Medicaid planning tools we developed since these new rules have been enacted.

Thanks to Roland Cheramie for his comments after the teleseminar: " Joyce and I would like to thank you again for the excellent presentation.  This was a great review, and also an update on current activities, new regulations etc.  It is also refreshing listening to others share questions. This presentation was very professional, and easy to understand this complicated process.  We viewed your outline on our computer monitor, and listened on our amplified speaker system in the convenience of our family room.  What a way.....great job.....lets have more in the future.!"

If you'd like us to make you aware of future educational presentations, and include you in our e-newsletter, Your Estate Matters, simply send me an e-mail at paul@rabalaislaw.com, or give us a call at 225-329-2450.

Paul Rabalais

Louisiana Revamps Medicaid Eligibility Manual

On February 7, 2008, the Louisiana Department of Health and Hospitals reissued many relevant provisions of the Medicaid Eligibility Manual, replacing provisions that had been in effect since October 1, 1995. The changes are sweeping and much-anticipated. The revisions adopted many of the provisions of the Deficit Reduction Act of 2005, and made changes retroactive back to February 8, 2006.

Relevant changes include:

1. The look back date for transfers occurring on or after February 8, 2006 is 60 months;
2. For Medicaid applications on or after November 1, 2007, use $4,000 as the average monthly private pay cost;
3. The penalty period for assets transferred on or after February 8, 2006 for less than fair market value begins the month the applicant is determined eligible for Medicaid except for the transfer of resources;
4. If a transferred resource is returned, Medicaid will treat the resource as not having been transferred.

The new Louisiana Medicaid rules make it more difficult to protect your assets from the cost of long term care. I have to admit that the rules (particularly the one that provides that all transfers made since February 8, 2006) are subject to the 60 month look back date) are more stringent than what many other states have done.

My advice to most is the same: "If you want to protect all of your hard-earned assets from the rising cost of long term care, take the necessary action at least five years before you need Medicaid benefits."  If you want to know how the new Louisiana Medicaid eligibility rules affect you or your family, simply send me an e-mail at paul@rabalaislaw.com, describing your assets and income and any other particulars you feel are relevant, and then see how quickly I respond with some answers for you.

Paul A. Rabalais

Types of Louisiana Trusts

I held a Staff Training Meeting with everyone in the office today - just like I do every Thursday. The attorneys and paralegals are all in attendance. It's a great opportunity to learn and share ideas. This week's topic was trusts. We discussed many of the uses for trusts in Louisiana estate planning. Some of the uses include:

• Testamentary Trusts. These are often used when parents have minor children and the parents don't want a court overseeing their children's inheritance, and the parents don't want their children's inheritance dumped in their children's inheritance when the children turn 18.
• Medicaid Living Trust. If you don't want your entire life savings depleted on long-term care, you should consider our Medicaid Irrevocable Trust. If you do it right, you'll maintain control over your assets, but you won't have to spend them before qualifying for Louisiana Long Term Care Medicaid. Avoids probate too!
• Children's Inheritance Trust. This valuable trust enables you to make your children's inheritance divorce-proof. Would you like to provide for your children AND THEN your grandchildren? No problem. If your children don't spend all of their inheritance before your children die, use our Children's Inheritance Trust to make sure that your grandchildren will inherit when your children die.
• Revocable Living Trust. A common probate avoidance tool. Put all your assets in your Revocable Living Trust, and when you die, your family will avoid the probate - or in Louisiana called the Succession.
• IRA Trust. Want your big IRA to go for your spouse? Sure you do. But what if your spouse then leaves it to people other than your children? Simple solution - name your IRA Trust as the beneficiary of your IRA. Your spouse can benefit after you die, but you control where the assets go when your spouse later dies. This may be one of the most important estate planning tools that is available to you - particularly if most of your wealth is tied up in a roll-over IRA.Watch out for income tax rules though!!!
• Irrevocable Life Insurance Trust. If you're not careful, your life insurance death proceeds will be subject to the federal estate tax. Would you like half of your life insurance to go to Uncle Sam? Of course not. Use the ILIT to exclude your life insurance from your taxable estate.

There are tons of other types of trust. In fact, I was working with a Florida attorney last week. We were working on the provisions of what is commonly referred to as a "Gun Trust."

Bottom line - find out how trusts can help you accomplish your estate planning objectives. If you want to know more, either send me an e-mail at paul@rabalaislaw.com (you'll be amazed at how quickly I respond to your questions) or you can even call my office toll-free at 866-491-3884. Until next post...

Paul Rabalais

How Does a Succession Work in Louisiana?

There is tons of confusion among ordinary Louisiana folks about how a Louisiana Succession works. People often get confused about the difference between a succession the is "administered" versus a succession that is handled "without administration."

The simplest successions are handled without an adiministration. If all of the heirs are competent, and all heirs agree to accept the succession, and the succession is relatively free of debt, then we will prepare all of the succession pleadings, and all of the heirs will agree on the assets, debts, and distribution of the estate. After all of the legal pleadings have been signed by all of the heirs, and filed at the courthouse, a judge will sign a "Judgment of Possession," which orders third parties to transfer assets into the heirs' names.

In all other successions, there will be an administration. An administration is required when:

• An executor of the will (or administrator if no Will exists) must be confirmed by the court to handle necessary estate matters;
• Someone contests a succession matter;
• Succession assets need to be sold so the proceeds may be divided among the heirs;
• All of the succession funds need to be collected and deposited into a succession bank account prior to their distribution;
• Someone needs access to succession funds to pay succession debts and other administrative expenses; or
• For any other necessary reason.

If you'd like to find out whether a Louisiana succession should be "administered," simply shoot me an e-mail at paul@rabalaislaw.com, or post a comment to this Post, or give my office a call at (225) 329-2450.

Until next time...

Paul Rabalais

Come See Us At the Life After 50 Expo

I'll be an Exhibitor at the Life After 50 Expo sponsored by The Advocate & WBRZ Channel 2, on Saturday, April 19, 2008, at the Baton Rouge River Center Exhibition Hall. There's free admission, free parking, and lots of free valuable information.

Come by, visit our booth, and chat with me, our paralegals, Stephanie Purdy and Laura Bittel, and attorney James Vilas. We'll be there to answer any questions you have and provide you with important information to help you protect your family and your estate. See you there!

Paul Rabalais

Synchronize Your Beneficiary Designations With Your Will and Trust

Many people go to great lengths to make sure their Last Will and Testament, or their Revocable Living Trust, is set up just right so their heirs are protected and the inheritance is not squandered. For example, a couple with two minor children set up their Wills so that if the parents pass away, the parents' assets go into trust for the minor children, and a trustee is named, and the children can't access the assets on their own until they reach the age of 25. The Will is perfect.

What the parents fail to realize is that most of their wealth is in assets like 401(k) plans and life insurance policies. These assets are payable at death to the named beneficiaries, regardless of what the Will says. If the parents die with minor children, and the children are named as beneficiaries, the money will be paid to the court appointed legal guardian, and the minor's will have it thrown into their lap on their 18th birthday.

The solution? Make sure, as part of your estate plan, that your beneficiary designation documents are consistent with your other testamenary provisions. For example, some parents will name their spouse as their primary beneficiary of their life insurance and retirement accounts, and then name the trust for their children as the contingent beneficiary. The will avoid life insurance and retirement account proceeds being dumped into a child's lap. Done right, you can leave your children an inheritance that will benefit them for the rest of their lifetime.

Paul Rabalais