The Rabalais Law Firm's La. Estates Blog

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

Questions from Today's Presentation

I gave a presentation today to a roomful of folks earlier today. They were quite inquisitive. A few of the questions they had me answer were as follows:

1. If you buy and sell lots of vehicles, do you have to re-title all of them in your living trust's name?
2. How does real estate get transferred to a trust?
3. How do mineral rights from another state get transferred to a trust?
4. Does your home in the living trust get to keep the homestead exemption?
5. Is there a difference in transferring assets to a revocable trust versus an irrevocable trust?
6. What are the pros and cons of using wills versus using trusts?
7. What if you get a trust in another state?
8. Can you set up your estate so that you give someone the right to live in your home when you die and then after some period of time the home reverts back to other owners?

There was one gentleman there who spoke to me aftewards. His wife's father died and the family wants to sell the father's home but there are 11 heirs. I told him it would be simple to have his wife appointed as the Independent Administrator so she could sell the home in Metairie without having to get all 11 of the children involved in the Purchase Agreement or involved in the closing of the sale.

Even though the event was scheduled to last only one hour, it went long because the audience was so engaging with dozens and dozens of questions. Finally I cut off the question and concluded the presentation so everyone could go eat some lunch.

I have another big speaking engagement tonight. I'll keep you posted on your progress.

Paul Rabalais

Don't Name Estate as Beneficiary of Living Trust

I met and was working with a nice woman today. Her husband died a while back and she had to go through a Louisiana Succession in order to sell her home and move into a new condo she is renting. She said the Succession was a lengthy experience.

She wanted to set up her affairs so that when she died there would be no Succession or probate. Funny thing was that she and her husband had set up a living trust before her husband died. The home, however, was not in the trust.

The couple had named a bank as the trustee of their trust to handle the trust investments. The problem was the trust instrument stated that after the couple dies, the trust assets are payable to the executor of the estate - this will require a Succession which is what she is trying to avoid.

While our new client was in our office, we called the Trust Department of the Corporate Trustee who agreed that we need to "merge" the provisions of her Will and her Trust so that all dispositive provisions are in her trust eliminating the need for a Louisiana Succession when she dies.

So we are helping her accomplish her wishes of providing for the disposition of her estate while eliminating the necessity of a Succession at her death.

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

Controlling the Inheritance of Your Child Who Does Not Have Children

Was working with a really nice family today. Mom wants to leave her estate to her children equally, which is common, but one of her children does not have any children and probably will never have children. Mom wants to control what happens to this child's inheritance when the child dies. Mom wants the money and assets to stay in her family. What should Mom do?

Mom has a few options:

• Mom can leave her estate equally to her children, outright, and hope that her "child without children" will either die without a Will or writes a Last Will leaving his estate (or at least Mom's part of his estate) to family members.
• Mom can leave this child's portion of her estate in trust so that when this child later dies, it is directed that the remaining trust assets are to stay in the family.

Mom liked the idea of leaving part of her estate in trust for the child that did not have children. This makes it more likely that whatever is left when the child dies will be kept in the family.

Trusts can be tricky tools but when used properly they can help you and your family avoid the Louisiana Succession, protect assets from long term care nursing home expenses, protect a child's inheritance from their past and future divorces, and save taxes. Let me know if you'd like to discuss including a Louisiana trust as part of your estate plan.

Paul Rabalais

How Dad Can Protect His New Home for His New Companion and His Children

A recent comment to a post posed a question with the following facts: Mom died leaving her half of the home to Dad, outright. Dad sold the home and bought a new one. He lives with a new female companion. If Dad dies, he wants his new friend to be able to continue living in the home, but ultimately, he wants his children to recognize the financial benefits of the new home.

Pretty simple solution: Dad should write a will designating that the companion has the usufruct of the home when Dad dies. Dad can designate the usufruct of the term. It could be for her lifetime or it could be for a shorter period of time. At the termination of the term of the usufruct, full ownership of the home would revert back to Dad's children.

Alternatively, Dad could give her a "right of habitation" but the usufruct is more common. He could also put the home into a living trust and designate everyone's rights in the trust. Most people, however, would solve this problem by writing a will correctly and having him grant her a usufruct over the home.

Is the "Living Trust" the "new Will"?

Louisianian's left and right are asking about the revocable living trust. So much so that it appears that the revocable living trust is now the new "Last Will."

Traditionally, people would go to an attorney and have their Will prepared to designate who would inherit from them and who would be their executor. But lately, people are findout out the benefits of the revocable living trust, and they want to take advantage of them.

People who seem to have the most desire to create a living trust include:

• people who have been involved in a difficult probate/succession;
• people who have heard that probate is expensive, time-consuming, and public; and
• people that have been involved in a simple trust administration.

Individuals or couples who have little or no desire to form a living trust include:

• those who had little or no problems going through a Louisiana succession for a deceased family member;
• young individuals or parents of minor children that prefer not to hold title of all of their assets in a trust for the remainder of their lifetime; and
• those who are new to the concept of estate planning and not at all familiar with probate-avoidance planning.

In Louisiana, living trusts are popular because:

1. The Louisiana Succession system involves families having to deal with our broken judicial system - the courts are now filled with unnecessary expenses, delays and ineffeciencies;
2. In recent years, the Louisiana Consitution was changed to grant the homestead exemption to homeowners that transferred their home to their trust; and
3. Consumers are using the internet and other educational tools to become more aware of estate planning concepts like probate avoidance and revocable living trusts.

If you live anywhere in Louisiana and would like your loved ones to obtain the benefits of having a living trust (such as quick and easy estate settlement without court proceedings), give us a call at 866-491-3884. You'd be surprised how easy it is for us to walk you through the steps to get this taken care of and provide for your spouse, children, or other loved ones.