Estate Planning Law Firm of Louisiana

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

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

Situation Where Revocable Living Trust Fits Well

Worked on a Louisiana Revocable Living Trust yesterday. It was a good fit for the RLT. The couple has no children. His mother had died a few years ago and she had a revocable living trust at the time of her death, and the husband was the trustee. He mentioned it was a breeze to settle her trust with his siblings - no lawyers, no probate, no problem. It was good that he was familiar with how RLTs work. They own some real estate outside of Louisiana so they wanted to avoid the ancillary probate - another good reason to have a Louisiana Revocable Living Trust. By using the trust, married couples have the ability to provide income to a certain group of people after the married couple dies, and then provide that the trust assets will benefit another younger group of people after the successor income beneficiaries die. The list of options is really unlimited. If you want to find out whether a Louisiana revocable living trust could make things simple for you and your family, shoot me an e-mail at paul@rabalaislaw.com, and I'll be happy to put my two cents in. Paul 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

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

Make a Trust the Beneficiary of a Trust

Can a one trust be the beneficiary of another trust in Louisiana? Yes it can.

Let's say that you want to leave an inheritance for your child. When your child dies, you want the remaining assets to go to your child's children. Let's also say that your grandchildren are too young to receive an inheritance anytime soon. What do you do?

Name your child as the income beneficiary of a trust and allow principal distributions to him or her for their support, maintenance, education, or medical expenses. Then, instead of naming your grandchildren as principal beneficiaries, name a trust for your grandchildren as the principal beneficiary of the trust. Sound confusing? It might, but you can do some powerful things for your children and grandchildren by using multiple trusts. It can be simple. And it's not just for the wealthy.

Paul Rabalais

Warning: Be Careful With IRA's and Revocable Living Trusts

Here's an example I dealt with recently: An individual moves to Louisiana from another state. Prior to moving to Louisiana, she created and funded a Revocable Living Trust in that other state. Her goal was to avoid probate. While in that other state, she named her Revocable Living Trust as the beneficiary of her large IRA.

When she died, the custodian of the IRA said that since the Revocable Living Trust provisions required that the trust be terminated at her death, the entire IRA must be taxed to the decedent in the year of her death. Had she named her children as the beneficiaries of the IRA (instead of the trust), they could have been able to take minimum taxable distributions over their lifetime.

Moral of the story: If probate avoidance is your primary goal, name individuals as beneficiaries of IRAs and 401(k)s. They avoid probate and there won't be any question about your beneficiaries' distribution options.

Paul Rabalais

Remember Trust Administration After First Spouse's Death

Many married couples with revocable living trusts believe that no actions need to be taken when the first spouse dies if all assets are titled in the name of the trust. While there may be no succession or probate required, there is what we call a "trust administration" that must be done.

Let's say, for example, that a married couple has a revocable living trust with $1.5 million in assets. Let's assume the husband dies first. The husband's one-half interest in these assets should be retitled into what we might call the "Decedent's Trust," which becomes irrevocable, and the wife's portion is retitled into the name of her "Survivor's Trust," which remains revocable by the surviving wife.

There are two primary reasons this must be done. First, if the trust administration is done properly, none of the Decedent's Trust assets will be included in the wife's estate for federal estate tax purposes when she dies. Second, the beneficiaries of the Decedent's Trust assets are fixed upon the death of the first spouse, while the wife can change the beneficiaries of her Survivor's Trust.

Proper trust administration after the death of the first spouse makes things easier both for the surviving spouse and for the trustee who will handle the affairs after the death of the surviving spouse - and it may help save a pile of estate tax too!

New Report on Revocable Living Trusts Gives Answers

If I had a nickel for everytime someone asked me whether they should have a Will or a Revocable Living Trust, I'd have a lot of nickels. About 30 minutes ago, I finished drafting my Special Report titled, Revocable Living Trusts in Louisiana: Choosing Between a Will and a Trust as Your Primary Estate Planning Tool." I've been working on it for about a week and I'm excited because you will now be able to get most - if not all - of your questions answered about revocable living trusts which are highly promoted in many national estate planning consumer publications.

If you want to be one of the first to review this 14-page Special Report, simply comment to this post and I'll personally e-mail it to you at no charge.

Revocable Living Trust for Family That Wants To Avoid Probate

I spoke on the phone today with a gentleman. I had prepared Wills for he and his wife ten years ago - a very nice couple. Since then, he's been handling his elderly mother's affairs. She lives in another state and she has a Revocable Living Trust. He stated that he wanted a Revocable Living Trust for his family because: (1) he saw how easy it was for his mother to establish her trust; (2) he wants to avoid the probate expense; and (3) he has real estate in another state and he wants to avoid the ancillary probate in that state.  We'll be preparing his family's trust and we'll put it into effect when he gets back from a week long trip to visit his mother.

While I'm officially neither pro-trust nor pro-will (it depends on the circumstances), I do benefit from hearing your stories about probates you've been involved in - whether good or bad, easy or difficult. Please feel free to comment.