Estate Planning Law Firm of Louisiana

Follow Up From Power of Attorney Article in E-newsletter

A while back I prepared durable powers of attorney and other estate planning documents for a nice couple. The husband emailed me and said he had gone to take care of some Social Security issues for his ailing wife at the local Social Security office. He brought along her power of attorney.

Even though the power of attorney was effective immediately, the Social Security office told him he needed to go get doctor's written statements that she was incapacitated. Also, they said they would not honor the power of attorney because it did not expressly give him the right to handle Social Security issues for her.

I emailed him back and told him that Social Security's position had no basis in Louisiana power of attorney law. Nonetheless we've just added language to our durable powers of attorney form so that in the future, the Agent will expressly be permitted to handle Social Security issues. 

Copy of My Recent Developments E-newsletter

Sent out the following Recent Developments E-newsletter to my contacts yesterday. Thought you might be interested in the topics discussed:

In this edition of Recent Developments, you will discover:

• How the Decline in the Value of Your Estate Affects Your Estate Planning;
• Caution: Your Old Power of Attorney May Not Be Worth the Paper It's Written On;
• Avoiding Probate/Succession in Louisiana Worth Carefully Considering;
• Find Out More About Estate Planning, Successions, and Medicaid By Checking Out Paul's Blogs; and
• Did You See My Ad for www.SuccessionAttorney.com?

How the Decline in the Value of Your Estate Affects Your Estate Planning

From an estate planning standpoint, we are living in uncertain times. The stock market lost half its value but is slowly working its way back up. Real estate values dropped. I met with a family last week whose real estate value had dropped from $1,300,000 to $400,000 in a few short months. The estate tax ($3,500,000 exemption for deaths during 2009) is scheduled to disappear in 2010, but reappear with a $1 million exemption in 2011 and beyond. Congress and the President are proposing significant changes to our estate tax laws but nothing has passed yet.

So if you live in Louisiana, what should you do? Married couples often question whether - upon the death of the first spouse - they should leave their spouse "ownership" or "usufruct" of their estate. Here's the short answer: If a married couple has a combined estate in excess of $1,000,000 in fair market value, you should leave the "lifetime usufruct" of your estate to your surviving spouse. None of the assets over which you leave your spouse usufruct will be lumped into the estate of your surviving spouse. If you leave your spouse "ownership," then your estate will be lumped into your spouse's estate for federal estate tax purposes.

If your combined estate is - and will continue to be - less than $1,000,000 in value, then estate tax implications should not need to be factored into your decision. Even if you leave your spouse "ownership," there should be no estate tax when the surviving spouse dies - unless of course they make major changes to tax laws in which case we'll start this conversation all over again!

Caution: Your Old Power of Attorney May Not Be Worth the Paper It's Written On

I've been getting more calls lately from real estate title examiners, investment companies, and clients, about powers of attorney. Many people don't like dealing with old powers of attorney.

Not long ago, a major investment company told me that they will not honor a power of attorney that is more than five years old. I guess they are concerned about their potential liability in the event they were not aware that the person revoked or changed the power of attorney in the previous five years.

Also not long ago, I was talking to the corporate counsel for a major bank. The bank lawyers called me from Dallas to tell me that they don't honor a power of attorney when two people have to act together on the power of attorney.

So, what should you do to make things easy for your family? I suggest that you take a look at your Power of Attorney. If it is more than five years old, sign a new one. And don't set it up so that two people must act jointly on your behalf. It is common that if you want to name more than one person to act for you, set it up so they can act "jointly or separately."

If it's been more than five years and you want to update, let us know. If we are going to update your power of attorney, we will also want to talk to you to make sure that the rest of your estate plan is in order. There have been some changes to our Living Will laws and our Last Will and Testament laws in recent years that you may want to incorporate in your plan.

Avoiding Probate/Succession in Louisiana Worth Carefully Considering

You've probably read about it in the national journals: "Avoid Probate With a Revocable Living Trust." Louisiana traditionally has not been one of the "major players" in the Revocable Living Trust talks - primarily because probate (or in Louisiana it's called "Succession") in Louisiana can be simpler and less costly than the probate processes that exist in other states like California where statutory required delays exist, and legislatively imposed court costs and attorney fees drive a family's probate costs through the roof.

In Louisiana, however, a succession can be a cost and an aggravation that can be avoided with careful preparation. In East Baton Rouge Parish, for example, the court costs have TRIPLED in recent months, due largely to the fact that they are building a new monster courthouse downtown. And it seems lately that unreasonable delays exist in either getting a judge to sign a probate order, or in getting the courthouse employees to promptly process the necessary paperwork.

So is there a better alternative? Maybe. A revocable living trust that is both set up correctly and funded with all of your potentially probatable assets can make matters easier for your surviving loved ones. And when you consider that the financial cost of settling a succession may cost $5,000, $15,000, $25,000 or more (a married couple will incur this cost twice), then why not do some work on the front end to get your affairs in order with a revocable living trust?

But before you create your revocable living trust, read two things. First, read my blog post about how to avoid a Louisiana succession. Second, read my blog post about a situation where a revocable trust did not avoid probate. Then if you think a revocable living trust may be right for you, let us know and we will guide you through it.

Find Out More About Estate Planning, Successions, and Medicaid By Checking Out Paul's Blogs

In case you haven't noticed, I write a fair amount about protecting your Louisiana estate. I'm on a mission to make sure that Louisiana family relationships prosper from generation to generation, and hard-earned wealth stays in the family. I've written quite a bit on these subjects. In addition to my book which you can purchase from Amazon.com, Barnes & Noble, and other fine bookstores, I also maintain three separate blogs (short for "weblog"). Feel free to check out:

• My Louisiana estate planning blog;
• My Louisiana Medicaid Planning blog; and
• My Louisiana Successions law blog.

I'm confident you'll find my blogs helpful. I'd even like to encourage you to post a comment or two. On my Successions blog, you can even subscribe to get email updates every time I post to the blog.

Did You See My Ad for www.SuccessionAttorney.com?

If you read the Baton Rouge Advocate, you may have noticed my print ad. It is running for 30 consecutive days. I just released my new report, "How To Avoid or Minimize Taxes, Probate Costs, Executor Fees, Attorney Fees, Family Conflicts and Delays After the Death of a Loved One."

The ad and the Report have created a small tidal wave of families interested in coming in to discuss how a deceased loved one's estate can be settled quickly, professionally, and amicably. The Succession Report is creating so much interest that people are "dying" to read it.

To get your free report go to www.SuccessionAttorney.com.

Until next time...

Paul A. Rabalais

Board Certified Specialist Attorney in Estate Planning and Administration

Understand Tax Laws Before You Sell or Donate Appreciated Property

I was visiting with a wonderful married couple today. They had seen me speak to a big church group a while back and they attended my Barnes & Noble book signing and mini-seminar. They were telling me how fantastic their children and grandchildren were.

They have owned some acreage for many years. It has appreciated significantly in value, but they are not at risk for paying federal estate tax (at least not unless there are some major changes in estate tax laws - which might happen). They were considering selling this property to one of their grandchildren. I pointed out that if they sell this property to their grandchild, they will pay approximately $100,000 of capital gains tax because there has been so much appreciation since their original acquisition.

However, if the grandchild inherits this property, then the grandchild will inherit it at a stepped-up basis. All of that appreciation that would be taxed if they sold or gave away would no longer be taxed.

Here's my rule: If you are certain there will be no federal estate tax, DON'T GIVE AWAY APPRECIATED ASSETS. If you give them away, your donees will receive your basis (called a "carry-over" basis). Let your heirs inherit the asset and let them enjoy the stepped-up basis.

Of course every circumstance is different and other factors may affect your decision, but make sure you know the rules before you take action.

Can Person With Usufruct Lease Property?

Let's say that "Mom" dies and leaves the lifetime usufruct of her home to her husband ("Step-Dad") because Mom wants to make sure that her husband has a roof over his head for the rest of his lifetime. After Mom dies, Step-Dad decides he wants to move into another home, and he wants to lease Mom's home so he can get some good rental income for his lifetiime. As usufructuary, can he rent out Mom's home and keep all of the rental income? Good question.

Yes, he can lease, alienate or encumber his usufruct. However, all contacts cease when he dies. So, let's say Step-Dad leases Mom's house for three years. Six months after Step-Dad and the tenant sign the lease, Step-Dad dies. The lease terminates and Mom's children own the house outright. They can evict the tenant even though the tenant has a three year lease.

Also, Step-Dad needs to know that he is responsible for the abuse that his tenant makes of the property.

Paul Rabalais

Divorce Revokes Bequest to Spouse in Louisiana

I was asked today whether a bequest to a spouse is revoked if the couple gets divorced.

The answer is a resounding "Yes."

Not only is the bequest to the spouse revoked upon a divorce, but any other testamentary designation such as executor or trustee is also revoked. If, however, a divorced person WANTS to leave a bequest to his or her former spouse, they can do that. They may need to revise their Last Will after the divorce.

Since our law only addresses "divorce," I suppose a bequest to a spouse is valid if the testator dies the day before the divorce becomes final. So if you are separated and contemplating a divorce, you better call our office to revise your Last Will so that your "ex-spouse to be" does not inherit from you should the unthinkable happen before your divorce becomes final.

The question I'm uncertain about is, "What happens when you die and your ex-spouse was named as the beneficiary of your life insurance or retirement plan? Our Louisiana law addresses only provisions in a testament, but beneficiary designations are not testamentary dispositions. Perhaps the life insurance policy or the retirement plan document should have a provision revoking the designation upon divorce. Feel free to shed some light if you have some knowledge in this area?

Or what if your ex-spouse is still the beneficiary of your revocable living trust, and you don't amend your trust after your divorce?

Careful Wording For Bequest of Business in Will

Was working with a nice couple yesterday. They've spent years building a successful business. One of their children works with the business and much of the growth has been attributed to that child. The couple wanted to make sure that this particular child inherited the business, and that their remaining assets would be divided among all their children in a certain proportion.

Their business is owned by their LLC (limited liability company). Sounds pretty simple. Leave the LLC to that one child, and split up everything else.

However, they run their business out of a warehouse. What they failed to mention - until the very end of our discussion - was that the warehouse is owned by another LLC. In order to accomplish their objectives of leaving all the business assets to their child, we have to structure their Wills so that both LLC's are bequeathed to this particular child, with everything else being divided among the children.

We also talked about gifting small percentage interests of the business to the son annually to avoid estate tax - but that's another story.

Bottom line - if you are going to leave a business to someone in your will, make sure you structure the bequest so that it includes not only the name of the entity, but any other business assets that you may own individually or that you may own in another entity.

We can help. If you live in Louisiana and need help with estate planning for the succession of your business, give me a call at 225-329-2450, or shoot me an email at paul@rabalaislaw.com. Be happy to chat with you about it.

Paul Rabalais

In Their Own Words

“We were very pleased with the services Mr. Rabalais and his staff provided in our Estate Planning. Mr. Rabalais is very knowledgeable in Louisiana Tax and Estate Law and explained everything very clearly. We appreciated the efficiency of the staff and the process from the first visit to the last. Sending the documents to be read and corrected by email allowed us time to really study them and the corrections were complete prior to the last visit for signing. Thank you for the nice binder to keep everything organized in one place. We highly recommend you and your staff.”

 

-Randy and Debora Braswell

Greenwell Springs, LA

Another testimonial - thanks!

“Your Firm provided needed guidance and knowledge in our estate planning. Trusts and living wills were also drawn up for us. Information was shared in a very professional manner. Prior to signing the final documents, all misunderstandings and areas of confusion were thoroughly explained, necessary changes were made to the documents. Dale and I appreciate the final binder which was provided to us. The information contained in it provided one place to start the search for account numbers when needed.”

 

 -William and Dale W.

Baton Rouge, LA

Looking For Expert on Term Life Insurance AND the Internet

I'm on a mission to make it easy for parents with minor children to legally and financially protect their kids. My wife, Amy, and I have five kids and we know how busy it is these days for parents to take time to address these important but often neglected legal and financial issues. Most parents ignore that fact that they need to create important legal documents to name guardians for their kids, and to require that their children's inheritance be placed in trust for their kids.

Here's a few things I've done to accomplish this goal - but I've got a long way to go:

• I wrote a book in layman's terms which teaches parents of minor children what they need to do to protect their minor children.

• I created a website called www.yourkidsguardian.com. Louisiana parents can go to this website and create free legal documents designating the guardian of their minor children in the event parents die before their children reach age 18.

• I created a separate company which hosts a website which allows Louisiana parents to create self help legal documents like Wills, Wills with Testamentary Trusts, Durable Powers of Attorney, Health Care Powers of Attorney, and Living Wills. The site is still in test mode at this moment but you can check it out at www.YourLouisianaWill.com

I know that many parents have also neglected to purchase term insurance to provide for their minor children. On my www.YourLouisianaWill.com site, I'd like to give parents an opportunity to purchase term insurance (which would be payable to their children's trust).

I'm looking for someone who is an expert in both term insurance AND the internet that can partner with me to provide this valuable service to Louisiana parents. Do not contact me if you are not familiar with internet marketing, website development, marketing campaigns, and you are qualified, experienced, and licensed to sell term insurance in Louisiana. The person I work with must be courteous to others, self-motivated, and have a passion for what they do.

If you think you can help, send me an email at paul@rabalaislaw.com and let me know why. This is a tremendous opportunity.

Paul Rabalais 

Force Beneficiaries of IRA to Take Required Minimum Distributions By Naming Trust as Beneficiary

Have been asked a couple of times in the last couple of weeks to help people set up their IRAs so that when they die, the beneficiaries could only receive the required minimum distribution (RMD) from the IRA.

The reason people typically want to do this is twofold:

1. You virtually can guarantee that your beneficiary will receive annual income for the rest of the beneficiary's lifetime. The rules say that a non-spouse beneficiary must take RMDs over the beneficiary's life expectancy.
2. You can prevent your beneficiary from taking a lump sum distribution - requiring a hefty income tax bill - and then blowing the inherited funds.

Here's how it works:

• Determine who you want your beneficiaries of your IRA to be. It might be your children, your grandchildren, or other loved ones.
• Determine who will be the trustee of your "Stretch IRA Trust." This should be a responsible person or a trust company that will manage your IRA after your death and distribute to your beneficiaries their RMD amount.
• Work with an attorney like me to establish your Stretch IRA Trust.
• Give a copy of your Trust to your IRA custodian and make sure they will comply with the terms of your trust after your death.
• Name your trust as primary or contingent beneficiary of your IRA. Perhaps - if you are married - you want your spouse to be your primary beneficiary, and you want your trust to be the contingent beneficiary.

Paul Rabalais