what others are saying about this book: paul rabalais does

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What others are saying about this book:

Paul Rabalais does a great job making complicatedlegal strategies simple. I recommend this book and hisservices to all of my clients who need estate planninghelp.

- MacAllyn J. Achee, Baton Rouge, LA attorney

Paul takes complicated legal topics and describes themin a way that makes them simple enough for anyone tounderstand.

- Marcel Dupre, President, Wealthplanners, LLC

s someone who provides estate planning legal servicesin Louisiana, I recommend this book to any individual who wants to learn more about this important topic.

- Doug White, Shreveport, LA attorney

I no longer provide estate planning services to clients. I

refer clients who need estate planning legal services toPaul.

G. Steven Duplechain, Baton Rouge, LA attorney

Everyone who lives in Louisiana and wants to protecttheir estate for themselves and their family should readthis book.

- Gary L. Magee, Baton Rouge, LA, CPA



EstatePlanningLouisiana

A Layman’s Guide To Understanding Wills, Trusts, Probate, Power of Attorney,

Medicaid, Living Wills, and Taxes

Paul A. Rabalais

Estate Planning for Life, LLC

Baton Rouge, Louisiana



Estate Planning in LouisianaLayman’s Guide To Understanding Wills, Trusts, Probate,

Power of Attorney, Medicaid, Living Wills, and Taxes

© by Paul A. Rabalais

ll rights reserved. No part of this book may be reproduced ortransmitted in any form or by any means, electronic or mechanical,including photocopying, recording or by any information storageand retrieval system, without written permission from the author,except for the inclusion of brief quotations in a review.

13 ISBN: 978-0-9793982-0-910 ISBN: 0-9793982-0-7

First Printing 2007Printed in the United States of America

10 9 8 7 6 5 4 3 2 1

ibrary of Congress Cataloging-in- Publication DataRabalais, Paul.Estate Planning in Louisiana: A Layman’s Guide To

nderstanding Wills, Trusts, Probate, Power of Attorney,Medicaid, Living Wills, and Taxes/Paul Rabablais. ─ 1st ed.P.cm.Includes bibliographical reference (p.) and index.

ISBN1.

Published by:Estate Planning for Life, LLC6230 Perkins Road, Suite ABaton Rouge, LA 70808 U.S.A. Telephone: (225) 329-2450Email: [email protected]

Website: www.rabalaislaw.com



Paul Rabalais

v

To my wife, Amy, and our five children: Andrew, Taylor,Connor, W am, an Anna C a re



Contentsbout the Author ixcknowledgments x

Warning —Disclaimer

1 Estate Planning in Louisiana 1Why is everything so different?

2 Lou s ana Commun ty Property 9arriage is an equal partnership – sort of

3 Force He rs p 1What if I don’t want to leave it to my kids?

4 Power of Attorney 23Who will take care of me and my money?

5 Louisiana Intestate Laws 31What Happens When You Die Without a Will?

6 Your Last ill and Testament 39Maybe the most important document you ever sign

7 Protect Your Children and Grandchildren 51How to preserve your assets from taxes, Long term

care costs, and your children’s divorces and poor

spending habits

8 Multiple Marriages 63Protect your second spouse AND your children

from your first spouse

9 Death and Taxes 75



Estate Planning In Louisiana

viii

Shakespeare said it best

10 Usufruct 85

What in the heck is a “ sufruct?”

11 Living Wills 97aking your wishes known about life support

machines

12 Trusts 103Trusts can be a great tool – but don’t believe

everything you hear

13 Medicaid Planning 115How to Pay for the Nursing Home

14 Successions and Probate 131Handling legal matters when a loved one dies

15 Nonprobate Assets 149

These are important and often overlooked

16 Estate Planning Letter of Last Instructions 155ake it easy for your loved ones

17 Get Started 159It’s not as painful as you might think

Glossary 165Index 171Quick Order Form 180



About the Author

Paul A. Rabalais discovered the benefits of estateplanning at an early age. At the age of eight, he receivedan inheritance from his grandmother. The fruits of

his inheritance helped him pay for his college and lawschool education.

In 1987, Paul graduated from Louisiana State University with a degree in Finance. In 1990, he earned his lawdegree from LSU Law School.

Paul furthered his knowledge of estate planning and the

federal tax system by earning a Masters Degree in TaxLaw from Boston University School of Law in 1991.

From 1991 t roug 1994, Pau wor e or some o t etop law firms in the State of Louisiana. In early 1995,Paul started his own estate planning law firm.

Paul has provided estate planning legal services tothousands of clients through his law firm. He has written numerous articles on various aspects of estateplanning, and he has given hundreds of seminars onestate planning.

Paul can be contacted by email at [email protected]




x

Acknowledgments

I have not attempted to cite in the text all of the authoritiesand sources consulted in the preparation of this book. To do so would require more space than is available.

The list would include departments of the parish, stateand federal government, libraries, Web sources, andnumerous individual clients.

Valuable information (and inspiration) were contributedby John Eggen and Dan Poynter. Special thanks goesto my two law firm employees, Stephanie Purdy andLaura Bittel, who helped me arrange to have enough

uninterrupted free time to be able to write this book.

Special thanks to all of my seminar attendees whopart c pate n a oo t t e survey. ey nc u e: W amand Virginia Bernard, Louis and Theresa Brooks, YvonneDavid, Joseph and Patricia Demarte, Ernest and AsayoDvorak, Betty Jo Finley, Fred and Marjorie Frey, Evelyn

Hanson, Henry and Maria Mahier, Cindee McNeely,Louie and Mildred Mixon, Myrtle Pettit, Donald Ruiz, Joyce Siegel, Clayton Shill, Donald and Elizabeth Strain,Gerald and Beatrice Tullier, Ella Turner, Paul Vallance,Elvin and Glynn Watts, Marlene Welch, Joseph andCarol Wiltz, and Gary Whittington.

Bob Spear did the copy editing and interior design.

ngela Farley provided a great cover design.



Paul Rabalais

xi

Disclaimer

This book is designed to provide information about thesubject matter covered. If you require legal, accountingor other professional assistance, the services of a

competent professional should be sought.

Every effort has been made to make this book as completeand as accurate as possible. However, there may bemistakes both typographical and in content. Therefore,this text should be used only as a general guide andnot as the ultimate source of estate planning law inLouisiana. Further, this book contains information on

estate planning only up to the printing date.

The purpose of this book is to educate and entertain. Theaut or s a ave ne t er a ty nor respons ty toany person or entity with respect to any loss or damagecaused or alleged to be caused directly or indirectly bythe information contained in this book.

If you do not wish to be bound by the above, you mayreturn this book to the publisher for a full refund.



Chapter 1

Estate Planning in

LouisianaWhy is everything so different?

ou’ve all heard of the phrase, “Getting your affairs inorder.” Well, that’s a simple but effective definition

of estate planning.

You don’t know when you’re going to die. You don’tknow if you’ll be incapacitated during your lifetime. Asa result of that uncertainty, you need to plan.

The purpose of this book is to educate you, the lay person,about estate planning. This book is specifically designedto benefit you if you live in the State of Louisiana. Whent comes to estate planning, Louisiana laws are differentrom t e aws o a t e ot er 49 states.

state Planning Involves Protecting What You Own

You’ve probably worked hard to accumulate what you

have. If you don’t plan properly, your assets can betaken away. For example, if you go to a nursing home, you could spend thousands of dollars each monthon your care. Or, if you don’t handle your retirement




account properly, you could pay unnecessary incometax. If you don’t plan for your future incapacity, yourestate could be squandered away in a court-supervised

guardianship proceeding. And with all of the lawsuitsn Amer ca to ay, t s even poss e t at you cou esuccessfully sued resulting in someone taking yourentire estate away from you.

So, you can protect what you own while you are aliveby:

• Protecting your assets from nursing homeexpenses

• Minimizing your income tax• voiding a court-supervised guardianship

proceeding in the event of your incapacity, and• Protecting your assets if you are sued

state Planning Includes Taking Action to ProtectYour Surviving Spouse

You may be thinking that you want to make sure that your husband or wife has financial security when youdie. The Louisiana laws that apply when a marriedperson dies benefit the children more than the survivingspouse. It’s important you take action to give your

surviving spouse the security he or she needs.

xample: Bob inherited stock in ABC Inc., from hisparents. Bob and his wife, Mary, are using the dividendsfrom the stock to pay their monthly expenses. WhileBob knows that he’d want Mary to continue receivingdividends from the stock if Bob dies first, he never takes

any action (such as getting his Last Will and Testament wr tten to protect Mary. Bo es unexpecte y, anbecause Bob had taken no action to protect Mary, all of the stock Bob had inherited goes to Bob’s children—andMary is left with nothing.



Paul Rabalais

3

Louisiana law is unique when it comes to what thesurviving spouse can do with the family home after onespouse dies. In most instances, if a surviving wife wants

to sell the home that she lived in with her husband, sheas to get t e wr tten perm ss on o a o s c rento sell the home. You may be thinking that you and your spouse worked hard to pay for the home and youshouldn’t have to get the permission of your children (or your spouse’s children) in order to sell your home. But you can plan ahead to avoid these problems.

Proper planning can even prevent your children fromforcing your spouse to sell his or her house after youdie. Again, the laws that apply in Louisiana when youdie without planning typically favor the children overthe surviving spouse.

state planning can protect your spouse by:

rrang ng or your assets to e ava a e or your spouse after you die (as opposed to goingstraight to your children or to others)

rranging your affairs so your spouse will havethe freedom to sell your home, other real estate,or other assets after you die (without having toget the permission of your children), and

Eliminating the possibility that your childrencould force your spouse to sell assets or paythem their inheritance

state planning involves taking action to protectyour children.

You’ve worked hard over your lifetime raising yourc ren an prov ng nanc a secur ty or yourseand, if you’re married, for your spouse. You may bethinking that you’d like to be able to provide one final




4

gift to your children by leaving them an inheritance. Hownice would that be to allow your children to have peaceof mind in their remaining years because you were able

to leave them an inheritance.

Or maybe you ride around in your car with one of thosebumper stickers that reads, “I’m spending my children’sinheritance.” While that may be true, I’ll bet that you’drather have your children (or some other loved ones)inherit from you as opposed to your assets going to thegovernment or the courts.

Leaving assets to your children can be complex. Whether your children are young or old, rich or poor, marriedor single, you need to be aware of some importantlegal concepts that could jeopardize your children’sinheritance.

If your children are young, you’d better have an estatep an. I you e e ore your c ren reac t e age o18 and you don’t have a properly written Last Will and Testament, a judge will determine who will raise yourchildren until they reach the age of 18. In addition, a judge will also determine who will control any financialassets that your children inherit, and, if any of thoseassets need to be spent on your children before they

reach the age of 18 (for school expenses, living expenses,or for anything), a judge will have to approve eachexpenditure. This tutorship procedure is complicatedand expensive.

If your children are married—or if they’ve been married,or even if they might get married in the future—you need

to take action to protect their inheritance from theirpast or uture vorces. You a rea y now t at manymarriages these days end in divorce. What you may notknow, however, is that if your children inherit from you



Paul Rabalais

5

and then get divorced, your child may have to sharethat inheritance with your daughter’s ex-husband or your son’s ex-wife.

You can a so protect your c ren y arrang ng tominimize the tax that they pay at your death. A federalestate tax exists that could require your children to payup to 50% of their inheritance to the IRS. A LouisianaInheritance Tax also exists that can often be easilyavoided by timely filing of certain documents after aperson dies. Capital gains tax and income tax can also be

minimized or avoided through proper estate planning.

If you have children from a prior marriage, estateplanning is a must. It’s common for children to getnothing because their step-parent receives all theassets.

xample: James had three children from his firstmarr age to F rst W e. James an F rst W e vorce . James later remarried Second Wife. When James died, allof his assets went to Second Wife. James’ three childrenfrom his marriage to First Wife received nothing. Then when Second Wife later died, Second Wife left all of herassets (including the assets she received from James) toSecond Wife’s children.

Proper estate planning can avoid these problems because James could have arranged his estate plan to providefor Second Wife but also providing that at Second Wife’ssubsequent death, assets would revert back to James’ children.

Take action to protect your children:

If your children are minors (or if they’re 18or over but unable to manage money to yourstandards), set up your estate plan so the court




6

supervised guardianship proceeding is avoidedand you dictate who raises your children and who handles their inheritance;

•

If your children are older, take action to avoideav ng assets to your aug ter- n- aw or yourson-in-law, particularly if your children haveeen divorced or may get divorced in the future;

• rrange your affairs to avoid unnecessary taxes;and

• Protect the inheritance for your children—evenif you’re in a second marriage and you and

your spouse each have children from a priormarriage.

What makes estate planning in Louisiana sodifferent?

Louisiana laws, as they relate to estate planning, are

unique. Louisiana derives its laws from the FrenchNapo eon c Co e, un e a ot er states. Many o t enational articles or publications that you read aboutestate planning simply do not apply to Louisianaresidents.

Louisiana is one of a handful of community propertystates. What this means, in general, is that a marriage

is treated as an equal partnership. For example, if the husband starts and builds a business, and thatbusiness is titled in his name only, and his wife stayshome and raises their children, each spouse is deemedto own one-half of the business, even though it is titledin the husband’s name and even though he was the one who built the business.

Lou s ana s t e on y state t at as orce e rs p aws.Many people are confused about Louisiana’s forcedheirship laws. These laws provide that you cannot



Paul Rabalais

7

disinherit certain children. In general, if your childrenare 23 years of age or younger, or if they are disabled(regardless of their age), they are forced heirs and you

are going to have to leave them an inheritance. If youave one c , t e amount you must eave t at orceheir is one-fourth of your estate. If you have two ormore children, you must leave them half of your estate.Remember, most parents want to leave their entireestate to their children so, in those instances, the forcedheirship laws are not an issue.

The issue that confuses most people about Louisianaestate planning laws is the legal form of ownershipcalled “usufruct.” Usufruct exists only in Louisiana butit is a form of ownership very common in Louisiana. You won’t read about usufruct in any national publications,

ooks or magazines since it’s a Louisiana term, but if you want to understand estate planning in Louisiana,

you’d better understand something about usufruct andna e owners p.

Often, when a married person dies, his or her survivingspouse inherits the usufruct of the deceased spouse’sassets. This can be done through the Last ill and Testament of the person who died, or it can be donethrough the laws that apply when a person dies without

a Last Will and Testament. The surviving spouse, asusufructuary, can generally “use” and “receive the fruits”from those assets, and at some later date—perhaps ather remarriage or her death—those assets will thenelong to the naked owners.

Recognize that Louisiana laws are unique in that:

Lou s ana er ves ts aws rom France Louisiana is one of a handful of community

property states




8

• Louisiana is the only state that has forcedheirship for certain children, and

• The form of ownership called “usufruct” is very

common, but used only in Louisiana



Chapter 2

Louisiana Community

Property Marriage is an equal partnership—

sort of

L ouisiana is a community property state. Generally,each spouse owns one-half of all of the community

property. Our laws dictate what each spouse’s rightsand responsibilities are as it relates to their communityproperty.

xample: Ted and Ruth are married to each other. Theyare each in their second marriage. Ted and Ruth, while

they were married to each other, purchased a home,vehicles and other community property. The vehicles were t t e n e s name. e e t a ast w antestament leaving his home and all of his vehicles to hisson from his previous marriage, Fred. Since the homeand vehicles were community property, Ruth keeps herone-half ownership interest in them, and Fred inheritsonly Ted’s one-half ownership interest.

It’s important to understand Louisiana’s communityproperty rules. When a married person dies or gets




10

divorced, these rules dictate who owns what and therules dictate each party’s rights.

What is community property?

The general concept behind community property is thatall things acquired during a marriage by either spouseare owned one-half by each spouse regardless of whoearned it or regardless of how it is titled.

xample: During their 30-year-marriage, Steve earned

wages while his wife, Jane, stayed home. Jane never worked outside the home. Thirty years after theirmarriage, Steve had an investment account with$2,000,000 of assets. Even though Steve earned themoney, and even though the account was titled in hisname only, the account is community property and Janehas a one-half ownership interest in the account.

ommunity property includes:

• Property acquired during the marriage throughthe effort, skill or industry of either spouse

• Property acquired with community things• Property donated to the spouses jointly• Damages awarded for loss or injury to a thing

belonging to the community, and• ll other property not classified by law as separate

property.

Separate property includes:

• Property acquired by a spouse prior to the

marr age Property acqu re y a spouse w t separate t ngs

or with separate and community things when thevalue of the community things is inconsequential



Paul Rabalais

1

in comparison with the value of the separatethings used

Property acquired by a spouse by inheritance or

donation to him or her individually, and ngs acqu re y a spouse as a resu t o avoluntary partition of the community during theexistence of the community property regime.

resumption of ommunity Property

Things a spouse has during the marriage are presumed

to be ommunity property, but either spouse may provethat they are separate property.

Fruits and Revenues of Separate Property

The natural and civil fruits of the separate property of a spouse, minerals produced from or attributable to a

separate asset, and bonuses, delay rentals, royaltiesan s ut- n payments ar s ng rom m nera eases arecommunity property. For example, dividends produced y stock are community property even though the stockis the separate property of a spouse. Also, intereston savings accounts and certificates of deposit arecommunity property even though the funds in thoseaccounts are the separate property of a spouse.

spouse, however, may sign a proper declarationreserving the fruits and revenues as his or her separateproperty. As to fruits and revenues from real estateowned as separate property by a spouse, this declarationis effective when filed in the conveyance records of theparish where the real estate is located. As to fruits and

revenues of other assets such as stock or cash ownedas separate property y a spouse, t e ec arat on seffective when filed in the parish in which the personsigning the declaration is domiciled.




12

Unintentional Conversion from Separate Propertyto ommunity Property

xample: Jack and Jill are married. It is the secondmarr age or eac o t em. On t e ay t ey marr e , Jhad an investment account in her name that consistedof $500,000 worth of stocks, bonds, and cash. Her intent was that, at her death, she wanted this account to go toher three children from her first marriage. During thefifteen years that she was married to Jack, the assets inthe account produced a significant amount of interest

and dividends. Also during her marriage to Jack, shemade some deposits and took some withdrawals fromthis account. When Jack died fifteen years after theirmarriage, Jill’s account was valued at $850,000. Jack’sheirs (his children) argued that this investment wascommunity property (and one-half of the account shouldbe in Jack’s estate) since:

e ru ts an revenues nterest an v en sare community property; and

• When community property and separate propertyget commingled so that it is impossible to determine which assets are separate and which assets arecommunity, then all assets become community.

Since Jack’s last will and testament left his entire estateto his two children from his first marriage, Jill may beforced to give one-half of her account to Jack’s twochildren.

Perhaps Jill could have avoided this problem by signingand recording a Declaration reserving the fruits and

revenues from her separate property as her separateproperty. Or per aps s e cou ave avo e t eseproblems by entering into a matrimonial agreement with Jack prior to their marriage.



Paul Rabalais

3

Matrimonial Agreements

Many couples, especially those with children from

previous marriages, enter into a matrimonial agreement.ese agreements are a so common y re erre to as:

Pre-nuptial agreements Marriage contracts Separate property agreements

Spouses are free to establish by matrimonial agreement

an arrangement whereby there is no community propertyand all property is the separate of the spouses. Spousesmay also agree to modify the ommunity property rulesthat we have in Louisiana.

xample: Pete and Gloria are getting married. Theyeach have assets and income of their own. They enter

into a matrimonial agreement prior to their marriage w c states t at t ey w e separate n property. eagreement includes provisions stating that all assetsearned or acquired by a spouse during the marriage,including any fruits and revenues, are the separateproperty of the spouse who earns or acquires the assets.If, in the previous example, Jack and Jill had entered intoa proper matrimonial agreement prior to their marriage,

then at Jack’s death, Jill would have continued to ownthe entire $850,000 investment account.

Timeliness of Matrimonial Agreement

Prior to marriage, spouses may enter into a matrimonialagreement. During their marriage, spouses may, at

any time, terminate their matrimonial agreement andsu ect t emse ves to t e commun ty property ru es.

During their marriage, spouses may enter into amatrimonial agreement only by petitioning the court




14

and upon a finding by the court that the matrimonialagreement serves their best interests and that thespouses understand the governing principles and

rules.

During the first year after moving into and acquiringa domicile in this state, spouses may enter into amatrimonial agreement without court approval.

laims for Reimbursement

When a spouse dies, a spouse (or an estate) may havea claim for reimbursement against the other spouse (orestate).

xample: Two years prior to the marriage of Rod andBeth, Rod purchased a home for $200,000. He paid20,000 as a down payment, and financed 180,000

on a 30-year mortgage. Twenty years after they married w t e g t years o payments e t , Ro e . S nce t ehome was purchased prior to the marriage, the homeis Rod’s separate property. However, since communityproperty was used to pay the mortgage payments, Bethis entitled to be reimbursed from Rod’s estate for one-half of the total mortgage payments made during theirmarriage.

If community property has been used to satisfy aseparate obligation of a spouse, the other spouse or hisheirs are entitled to reimbursement upon terminationof the community property regime for one-half of theamount of the money used.

If a spouse uses his own separate property to satisfy acommun ty e t, t en upon t e eat o a spouse, e(or his estate) is entitled to reimbursement for one-half of the amount used.



Paul Rabalais

5

Retirement Accounts and Community Property

Different rules apply to retirement accounts such as

401(k) accounts and Individual Retirement AccountsIRAs .

xample: Ted was employed at a company for 35 yearsand built up his 401(k) so that when he retired, it was worth $800,000. When he retired, he rolled over his401(k) into an IRA. When Ted’s wife, Alice, died, Ted’sentire IRA stayed in his name while Alice’s Will controlled

the disposition of her half of all of the other communityproperty they acquired during their marriage. Eventhough the funds in the IRA were acquired during Ted’smarriage to Alice, those funds will stay in Ted’s nameand then when Ted dies, they will be distributed to thepersons designated on Ted’s beneficiary designationform. Neither Ted’s nor Alice’s Will controls the

disposition of Ted’s IRA.

If, in the previous example, Ted and Alice divorced,then the IRA would be split and it would be treated ascommunity property. But the rules are different when amarried IRA owner dies. IRAs can’t be put in the namesof both spouses.

onclusion

If you’re married and you live in Louisiana, you aresubject to the Louisiana community property laws which essentially provide that anything that you and your spouse acquire during your marriage is ownedone-half by each of you. You’ll want to remember that:

nyt ng you or your spouse earns ur ng yourmarriage is community property. It doesn’t matter




16

who earned it and it doesn’t matter in whose nameit is titled.

• Property you acquire by gift or inheritance, or

property you owned before you married, is yoursepara e proper y• Income from your separate property is community

property; and• You can enter into a matrimonial agreement

with your spouse to deviate from the Louisianacommunity property rules.



Chapter Three

orced HeirshipWhat if I don’t want to leave it to my

ids?

L ouisiana is unique in that it has forced heirship laws.Forced heirship has meant, over the years, that your

children are automatically entitled to inherit from you,regardless of what you put in your Will.

xample: Fred and Sally are married. Fred has twochildren who are classified as forced heirs. Fred’s Willleaves everything that he owns at his death to his wife,Sally. Fred’s ill violates the forced heirship provisions.Fred’s two children have a right to demand their forcedportion from Fred’s estate.

Many peop e con use t e orce e rs p aws w tthe intestate laws. If you die intestate (without a ill), your entire estate will go to your children, but yoursurviving spouse will have a usufruct over your half of the community property. The forced heirship laws apply

when you write a ill but leave all or the bulk of yourestate to someone other than your forced heirs.




18

Who is a forced heir?

In the past, all of your children were considered forced

heirs. On October 21, 1995, Louisiana voters approvedan amen ment to t e Const tut on o Lou s ana, ea ng with forced heirship.

Forced heirs are now defined, in general, as yourchildren who, at the time of your death, are 23 yearsof age or younger, or your children of any age who,because of mental incapacity or physical infirmity, are

permanently incapable of taking care of their persons oradministering their estates at the time of your death.

If your child dies before you, your child’s children areforced heirs if, at the time of your death, your child would have been 23 years of age or younger. However, if your child predeceases you, and your child has a child

who, because of mental incapacity or physical infirmity,s permanent y ncapa e o ta ng care o s or erperson or administering his or her estate, then thatgrandchild is a forced heir regardless of how old yourchild would have been at the time of your death.

What is the forced portion?

In general, if you have one forced heir at the time of your death, that forced heir is entitled to one-fourth of your estate. If you have two or more forced heirs at thetime of your death, they are entitled to split one-half of your estate. The portion the must go to your forcedheirs is called the forced portion. The remainder of yourestate (that you can leave to anyone you wish) is called

the disposable portion.

Life insurance proceeds and most retirement accountbalances (such as 401(k)s and IRAs) are not counted



Paul Rabalais

9

when calculating the forced portion. However, the valueof those benefits paid to a forced heir shall be creditedtoward his forced portion.

xample: J m e w t one orce e r, a son w o was22 at the time of Jim’s death. Jim’s Will left his entireestate to his new wife, Anna. Anna was also namedthe beneficiary of Jim’s $500,000 life insurance policyand Jim’s $400,000 IRA. Jim owned other assets worth$200,000 at the time of his death. Generally, Jim’sestate owes $50,000 (1/4 of $200,000) to Jim’s forced

heir.

Usufruct to Your Surviving Spouse

You may leave your surviving spouse the usufruct of theforced portion. The usufruct may last for the lifetime of the surviving spouse.

xample: ony e w t two c ren, ages 19 an22. In Tony’s Will, he bequeathed to his children theirforced portion (one-half of his estate to be divided equallyetween them), but he bequeathed his wife, Rachel, the

usufruct of the forced portion for the remainder of herlifetime. Tony bequeathed the remainder of his estate(the remaining one-half) to Rachel in full ownership.

This is permissible.

an You Disinherit a Forced Heir?

If you have a child who is 22 years of age, then he or sheis a forced heir. However, there are eight different justcauses for disinherison but you must expressly state

the cause in your ill and you must identify who youare s n er t ng. A parent as ust cause to s n er ta child if:




0

1. The child has raised his hand to strike a parent,or has actually struck a parent; but a mere threatis not sufficient.

. The child has been guilty, towards a parent, of crue treatment, cr me, or gr evous n ury.3. The child has attempted to take the life of a

parent.4. The child, without any reasonable basis, has

accused a parent of committing a crime for whichthe law provides that the punishment could belife imprisonment or death.

5. The child has used any act of violence or coercionto hinder a parent from making a testament.

. The child, being a minor, has married without theconsent of the parent.

. The child has been convicted of a crime for whichthe law provides that the punishment could belife imprisonment or death.

. The child, after attaining the age of majority andnow ng ow to contact t e parent, as a e tocommunicate with the parent without just causefor a period of two years, unless the child wason active duty in any of the military forces of theUnited States at the time.

For a disinherison to be valid, the cause must have

occurred prior to the execution of the Will that disinheritsthe heir.

onclusion

If you live in Louisiana, you are subject to our uniqueforced heirship laws which require that certain children

are automatically entitled to inherit from you. Ingenera :



Paul Rabalais

1

• Forced heirs are children 23 years of ageor younger, or children of any age who areincapacitated.

•

If you have one forced heir, that forced heirs ent t e to one- ourt o your estate. I youhave two or more forced heirs, those forcedheirs are entitled to one-half of your estate.

• Life insurance and most retirement accountsare not counted for purposes of forcedheirship

• You can expressly disinherit a forced heir for

one of eight just causes.



Chapter Four

Power of Attorney Who will take care of me and my

money?

What is a power of attorney? A power of attorney isa document that you sign that gives someone else

(your Agent) the authority to act for you under certaincircumstances.

xample: Ronald has two children, Adam and Eve.Ronald wants Adam to handle Ronald’s affairs for himif Ronald ever becomes incapacitated. Ronald signs apower of attorney authorizing Adam to handle all of Ronald’s financial affairs.

Why is a power of attorney important? If you don’ts gn a power o attorney an you ecome ncapa e omanaging your own affairs during your lifetime, either y accident or illness or other incapacity, there will likelye a court-supervised interdiction proceeding whereby

you and your closest relatives will be at the mercy of

the court and the court will, after considerable time andexpense, pick a curator whose job it will be to manage your affairs and report to the court for permission to act




4

on your behalf and for other matters. The interdiction isa burden that can be avoided.

Many people mistakenly believe that estate planningnvo ves gett ng t e r ast w an testament n p ace.Your Will does nothing for you in the event you becomeincapacitated during your lifetime. You need to makecertain that you have the proper power of attorneydocuments in place. Laws in Louisiana regarding yourpower of attorney differ from the power of attorney lawsof all the other states.

Why have a ower of Attorney

There are many reasons that you should sign a properlydrafted power of attorney as part of your estate plan:

• You will likely avoid the burdensome court-

supervised interdiction proceeding that may benecessary w en you ecome ncapac tate an you haven’t executed a proper power of attorney

• You can designate the person who will handle your affairs for you if you become incapacitated

• If an interdiction is necessary, you can designatein your power of attorney who you’d want the courtto designate as your curator or legal guardian

during your incapacity• You can authorize your Agent in your Power of

ttorney to engage in tax planning and Medicaidplanning techniques that he or she would not beable to perform in an interdiction proceeding

Different Types of ower of Attorney

powers o attorney are not t e same. You nee tomake important decisions before you sign your powerof attorney.



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5

Limited power of attorney. You and your two sistersinherited your parents’ house a year ago and it’s now on

the market. Someone has agreed to buy the home but you are go ng to e out o town on t e ate t e c os ng sto take place so you won’t be available to sign on the Actof Sale. Two weeks before the closing, you sign a LimitedPower of Attorney authorizing one of your sisters to actfor you in the sale of the property. Your sister cannottake any other actions for you other than acting for youat the closing. Your sister signs her name as your Agent,

and you receive your share of the proceeds of the saleof the home.

General power of attorney. While discussing your estateplan with your attorney, the attorney asks you who you’d want to manage your affairs if at some point in thefuture you become incapacitated. Your attorney explains

that most people execute a properly drafted power of attorney as part o t e r estate p an. He exp a ns t eenefits of avoiding the interdiction proceeding. You tell

the attorney that you would want your spouse signingfor you if you were unable to sign during your lifetime,and you state that you would want your oldest son to doit if your spouse were unable. Your attorney preparesa general power of attorney authorizing your spouse to

act for you and providing that your son can act for youif your spouse has died or is otherwise unable to act for you.

If, for example, two years later you have a stroke and your house or vehicle need to be sold, it should be simplefor your spouse (or your son if your spouse is unable)

to sign the necessary documents allowing them to sell your assets t at s w at s est or you.




6

Health Care ower of Attorney

You can designate in your health care power of attorney

who you would want making your medical decisions for you you are una e to ma e your own. You may ave aliving will whereby you declare your intentions regardinglife-support machines, but your health care power of attorney covers other important medical decisions.

For example, let’s say you are in surgery or have someother medical condition and you do not have the ability

to properly communicate your wishes regarding medicaltreatment to your physicians. If you previously signed ahealth care power of attorney, the physician can rely on your Agent that you named to make important treatmentdecisions for you.

When is Your ower of Attorney Effective?

Your power o attorney t at you s gn w e e ect veimmediately or it will “spring” into effect at a later date.

Immediate ower of Attorney

If your power of attorney is effective immediately (andmost are set up this way), then the person that you

designated to act for you can do so at any time. Youragent may present the power of attorney to a bank orother third party, or your agent may be required to record your power of attorney at the parish clerk of court office,and then submit a “certified copy” to the bank or thirdparty. If the power of attorney is effective immediately, your agent can act for you at any time until the power

of attorney is revoked or terminated.



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Springing ower of Attorney

Some people don’t want to give anyone else the right

to transact for them. However, you may want to set up w at s common y re erre to as a spr ng ng power oattorney, which springs into effect when you becomeincapacitated. Your incapacity will typically be triggered when doctors certify in writing that you are unable tohandle your affairs.

With a springing power of attorney, you are the only

person who can transact your affairs. However, whenthe doctors determine that you are unable, then theperson that you designated as your agent in yourspr ng ng power of attorney will be authorized to act for you. A spr ng ng power of attorney typically avoids thedifficult court-supervised interdiction and curatorshipproceeding.

Terminating Your ower o Attorney

You may terminate your power of attorney at any time.If you never terminate your power of attorney, it will beterminated by your death.

xample: Your aunt Nelda named you in her power of

attorney to handle her affairs. After Nelda had a stroke, you take care of paying her bills, selling her vehicle, and

uying and selling certain pieces of real estate. When Neldadies, the power of attorney is terminated and you haveno more legal authority to handle Nelda’s affairs. If Neldaappointed an executor in her ill, then the executor willhave the authority to handle affairs after Nelda’s death. If

Nelda died without a Will, the court will likely appoint ana m n strator to an e Ne a s a a rs a ter er eat .




8

Important Provisions for Your ower of Attorney

Louisiana law in the area of power of attorney is different

from all the other states. It is typically inadequate tos gn a power o attorney w c genera y states t at your agent can do “anything that you could do.”

In Louisiana, you must be express about the things that you want your agent to do. If you want your agent tohave the authority to do any of the following things,it must be expressly stated in the power of attorney.

Express authority in the power of attorney documentis required if you want your agent to have the authorityto:

• Make a donation during your lifetime, eitheroutright or to a trust

• ccept or reject an inheritance

Take out a loan Se , uy, mortgage or ease somet ng• Make health care decisions, such as surgery,

medical expenses, nursing home residency, andmedication.

Many improperly prepared powers of attorney do notinclude the express authority to make donations. When

a person is incapacitated, it often becomes advantages toa family for that person to make gifts to family membersor trusts, either to avoid tax or perhaps to speed upthe qualification process for Medicaid. If the power of attorney does not expressly authorize gifting, then theagent does not have the authority to make these gifts.

onclusion

Since there is good chance that you will not be ableto handle your own affairs at some point during your



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lifetime, a properly executed power of attorney is oneof the most important documents in your overall estateplan. Items to remember regarding your power of

attorney include:

You designate who can handle your affairs upon your incapacity

Having a power of attorney in place may avoidthe burdensome court-controlled interdictionproceeding

Your power of attorney can be general or it can be

limited to certain transactions Your power of attorney can be effective immediately

when signed or it can be effective only upon yourdisability

In Louisiana, certain provisions must be expresslystated in the document, such as the authority touy, sell, donate, or make medical decisions.



Chapter Five

Louisiana ntestate LawsWhat Happens When You Die

Without a Will?

ou’ve probably heard stories about what happens to your assets if you live in Louisiana and you die without

a Will. Maybe you heard that your entire estate goes tothe government. Maybe you’ve heard that probate willtake 20-30% of your estate. Perhaps you’ve heard that your children could force your surviving spouse to selleverything so that they can get their share. The purposeof this chapter is describe what happens to your assets when you die without a Last Will and Testament.

You and Your Spouse Have ommunity Property

Lou s ana s a commun ty property state. In genera ,everything a married couple acquires during theirmarriage is owned one-half by each spouse, regardlessof who earned it, and regardless of how the asset istitled.

There are certain exceptions to the rule that everythingis owned 50-50. Assets are the separate property of one spouse if that spouse inherited the asset, was the




32

recipient of a gift, or one spouse acquired the asset beforehis or her marriage. However, there is a presumption inLouisiana law in favor of commun ty property so t s

important for good records to be kept if a spouse wantss or er separate property to ma nta n ts separa eproperty status.

xample: Bill and Mary are married. Bill inherits$50,000 from his mother. This is Bill’s separate property(owned only by Bill—not community property owned byBill and Mary). Bill deposits these funds into the joint

checking account that he and Mary have had for years.Bill and Mary continue to deposit their paychecksand pay their monthly bills out of this same account.Because Bill’s separate property was “commingled” withBill and Mary’s community property, all of the account will likely be deemed commun ty property.

If, in the previous example, Bill had deposited his50,000 inheritance into a new bank account, and keptthose inherited funds apart from their community funds,then Bill could have maintained the separate status of those funds.

Remember that:

• Louisiana is a community property state whichmeans that each spouse owns one-half of all themarital assets

• spouse can have separate property if he orshe received an inheritance, received a gift, oracquired assets before the marriage

• Separate property commingled with commun ty

property can cause the separate property to loset s separa e proper y s a us



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You’re Married With Children and You Die Withouta Will

ll states, including Louisiana, have laws that determine w at appens to your assets you e w t out a LastWill and Testament. These laws are called “intestate”laws. If you have a valid ill when you die, you will havedied “testate.”

Louisiana intestate laws provide that when a marriedperson dies, his half of the community property goes to

his children (the children are called naked owners), buthis wife receives the usufruct of his community propertyuntil she either dies or remarries.

What is a “ sufruct?”

Usufruct is one of the most misunderstood terms in

Lou s ana estate planning law. Usufruct is a term usedexc us ve y n Lou s ana an s a very common orm oownership in Louisiana, particularly among marriedcouples. Essentially, when a spouse inherits theusufruct of assets, the surviving spouse has the right to“use” and receive the “fruits” from the assets until theusufruct is terminated.

xample: Bill and Mary have a bank account with$60,000 of community funds (this could be a checkingaccount, savings account or certificate of deposit). Billdies intestate (without a ill). Bill and Mary have threechildren. Mary continues to own her half of the account($30,000). Since Bill died intestate, Mary inherits theusufruct of Bill’s half of the account. Bill’s three children

are the naked owners of Bill’s 30,000. As usufructuary,Mary becomes the owner of the entire 60,000 account,ut when she dies or remarries—whichever comes first,

Bill’s children—the naked owners—will have a claim




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against Mary’s estate for the $30,000 over which shehad the usufruct.

When you die intestate owning commun ty property w t your spouse, your spouse w n er t t e usu ructof your share of the community property, and yourchildren will inherit the naked ownership of your shareof the community property. Yes, ownership of yourassets will be divided into two parts—usufruct andnaked ownership.

You’re Married and You Own Separate Property— Watch Out

Watch out if you’re married and you own separateproperty. Many married people owning separateproperty want their spouse to benefit from their separateproperty. But Lou s ana intestate laws provide that if a

married person owns separate property when he or shees ntestate, t at separate property w ypass t esurviving spouse and go directly to the children.

xample: Bill inherited stock in ABC, Inc. Bill and his wife, Mary, were living off of the quarterly dividendsfrom the stock. Bill died intestate (without a ill). Sincethe stock was Bill’s separate property, it went straight

to Bill’s children and Mary was deprived of that incomefor the rest of her lifetime.

You’re Single and You Die Without a Will

If you’re not married when you die, and you die withouta Will, your assets will go to your children. If any of your

children died before you, then that predeceased child’ss are w go to t at c s c ren. I you on t avechildren, your assets will go to your brothers and sisters(subject to your parents having the usufruct if they’re



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5

still alive). If any of your brothers or sisters died before you, then that sibling’s share will go to that sibling’schildren.

What Is robate and How Do The Assets GetTransferred to the Heirs?

When a Louisiana resident dies owning assets (such asreal estate, vehicles, stock, or bank accounts) titled inhis or her name, a succession must be done so that theassets can be transferred to the appropriate heirs.

When you start the process of handling a succession, you’ll need to gather records which describe what theperson owned when he or she died, such as bankstatements, brokerage firm statements, stock certificates,vehicle titles, and copies of real estate purchases. You’lltake these records with you when you go talk to the

attorney you’ve chosen to handle the success on.

The attorney should ask you several questions and thendetermine whether an “administration” is necessary. If the succession is not complicated, an administration isnot necessary. Circumstances which often require anadministration include:

ssets need to be sold or managed prior to thecompletion of the succession;

There is disagreement among the heirs; The deceased has bills that need to be paid

promptly; It will take a long time to determine the assets

and debts of the deceased; or

ny other complicating factor

If an administration is necessary, the attorney willassist the family in determining who should petition to




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be named the administrator by a judge. The survivingspouse or a child is often the one to petition to benamed the administrator. The attorney will prepare a

number of legal documents and then file those at thepar s court ouse. I t s not conteste an a o t elegal requirements are met, the judge will appoint thepetitioner as the administrator.

The administrator’s job is to collect all of the assetsof the deceased. He will likely open a bank account inthe name of the succession and deposit all succession

funds in that bank account. The administrator may notspend any of the succession funds without a judge’sapproval. There are strict rules in Louisiana regardingan administrator’s rights and obligations.

Whether there is an administration or not, the attorney will prepare a number of legal documents. One of those

documents is commonly called the Detailed DescriptiveL st. s s a eta e st ng o a o t e assets o t edeceased, as well as all of the debts of the deceasedand the succession. This list shows all the assets andliabilities as of the date the person died. All of the assetsmust show a value.

Finally, the attorney will prepare a legal document called

a Judgment of Possession. This document, which will besigned by a judge, orders banks, financial institutions,and other third parties, to transfer title of assets listedin the Judgment of Possession (JOP), from the name of the person who died, to the names of the heirs.

xample: John died on January 10 intestate leaving two

children—Phil and Susan. John owned a house, threean accounts, stoc , an a car. Jo n a no e t. Pgathered all the information on the assets and on January25, he took it to the attorney to handle the succession.



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7

The attorney prepared a number of legal documents,including a Detailed Descriptive List of Assets andLiabilities. Many of these documents were signed by Phil

and Susan. The attorney filed these documents at thepar s court ouse on Fe ruary 10, an on Fe ruary 14,the judge signed a Judgment of Possession (JOP) orderingthat John’s assets be transferred to Phil and Susan. The attorney then recorded a certified copy of this JOPin the parish real estate records—this transferred titleof John’s home. Phil and Susan took a copy of the JOPto the bank and the bank closed out John’s accounts

and wrote equal checks to Phil and Susan. The attorneysent John’s stock certificates to the company’s transferagent who mailed new stock certificates to Phil andSusan. Finally, Phil and Susan went to the Departmentof Motor Vehicles and had a new title issued to them fortheir dad’s car.

Are Any Taxes Due When Someone Dies Intestate?

Louisiana recently phased out its Inheritance Tax. Fordeaths occurring after June 30, 2004, no LouisianaInheritance Tax is due as long as the succession isstarted within nine months. For deaths prior to June30, 2004, inheritance tax is due, and the amount of tax can be from about 1% of the estate to up to 10% of

the estate. Your attorney will be able to determine theamount of the Louisiana Inheritance Tax, if any.

Congress has also imposed a federal estate tax on largeestates. For deaths occurring in the year 2007, the first$2,000,000 in value is exempt from the federal estatetax. The estate tax rates are about 40% to 50% of the

estate that exceeds the exemption amount. When amarr e person es ntestate, t ere s o ten no gett ngaround this estate tax.




38

xample: Bill and Mary owned $2,000,000 incommunity property. Bill had another $1,300,000 inseparate property. Bill died intestate during 2007 when

the estate tax exemption was 2,000,000. His estateequals 2,300,000 ( 1,000,000 commun ty propertyplus $1,300,000 separate property). His estate owesabout $120,000 in federal estate tax to the IRS—due within nine months of Bill’s death.

The big problem was that Bill died intestate. If Bill had aproper Will written, there would have been no estate tax

(due to a provision in our tax code which allows thereto be no tax due upon the death of the first spouse todie—if the ill is written correctly).

When a Louisiana Resident Dies Without a Last Willand Testament:

Lou s ana intestate laws favor the children overt e spouse;• If you own community property with your spouse,

your spouse will inherit the usufruct of your half of the community property until he or she dies orremarries, and your children inherit the nakedownership;

• If you own separate property and you’re married,

your separate property will bypass your spouseand go directly to your children

• If you’re single when you die, your assets will goto your children, and if you don’t have children, your assets will go to your brothers and sisters;

• succession will be necessary to transferownership of your assets; and

Lou s ana Inheritance Tax will not be due if t e success on s comp ete t me y; an e eraestate tax may due if you have a large estate (over$2,000,000 for death occurring during 2007).



Chapter 6

Your Last ill andTestamentMaybe the most important document

you ever sign

our Last Will and Testament (also referred to as“Will”) may be the most important document you ever

sign. You’ve spent your lifetime saving and investing for yourself, your family and your loved ones, and your last will and testament allows you to leave your possessions

ehind to the people that mean the most to you.

Reasons for Writing a ill

There are a number of good reasons why you should wr te a W , nc u ng ut not m te to:

Designating who you want your assets to go to when you die

Designating the executor or co-executor of your

estate Minimizing or avoiding federal estate tax Taking advantage of forced heirship laws if you

want to minimize what goes to a forced heir




40

• Providing for contingencies that might occur suchas a spouse or a child predeceasing you

• Making it easier for your spouse to sell assets you

leave him or her• Providing that your executor can serve as anindependent executor, which can allow yourestate to be settled much quicker and withoutsignificant court supervision

• Establishing testamentary trusts for the benefit of those heirs who might need help managing theirn er tance

What Makes a Will Valid in Louisiana

For a Will to be valid, it must be made in a form thatis expressly authorized by Louisiana law. In Louisiana,there are two forms of Wills: olographic and notarial.

lographic ill

n olographic Will is a document entirely written, dated,and signed in your handwriting. Your olographic Willmust be signed at the end of the ill. The olographicWill is subject to no other requirement as to form. Itdoes not need to be witnessed or notarized to be valid.

While olographic Wills are valid, they are notrecommended. Lay people typically do not have theexpertise to properly draft a Will. While it’s easy tocreate an olographic ill that is considered valid, it isdifficult to draft a ill that covers everything that needsto be covered with clarity. The improper inclusion orexclusion of one word can cause ambiguity which often

leads heirs to argue. Considering its importance, it’s widely believed that you should hire an attorney andhave your attorney prepare your Will using the properlegal language to document your intentions.



Paul Rabalais

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otarial Will

s opposed to the olographic Will which is entirely in

your own handwriting, the notarial ill is typed. You wills gn your notar a W at t e en an on eac separatepage. A notary and two witnesses will sign a declarationsimilar to the following: “In our presence the testatorhas declared or signified that this instrument is his last will and testament and has signed it at the end and oneach other separate page, and in the presence of thetestator and each other we have hereunto subscribed

our names this __ day of ________, 20__.”

There are additional requirements for a notarial Will if:

You know how to sign your name and read, but you are unable to sign your name because of aphysical infirmity;

You do not know how to read, or you are physicallympa re to t e extent t at you cannot rea , whether or not you are able to sign your name;

You are blind but physically able to read Braille;or

You have been legally declared deaf or deaf andlind and you are able to read sign language,

Braille or visual English.

Important Provisions to Include in Your Will

The meat of the last will and testament is typically inthe bequests (also called “dispositions”). In Louisiana,equests in Wills are classified as particular, general or

universal.

un versa equest or egacy o a o t e estate, orthe balance of the estate that remains after particularlegacies are satisfied.




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general legacy is one in which you bequeath a fractionor a certain proportion of the estate, or a fraction orcertain proportion of the balance of the estate that

remains after particular legacies.

n example of a particular legacy of cash is as follows:“I leave to my nephew, Austin H. Johnson, the sum of twenty-five thousand dollars ($25,000.00), cash, in fullownership.”

nother example of a particular legacy is a bequest of

real estate. xample: “I leave to my son, Jack Jones, Jr.,all of my interest in the property located at 123 FloridaBoulevard, Baton Rouge, Louisiana.” It generally is notnecessary to list the complete legal description of theproperty when including a bequest of real estate in yourWill.

Sometimes people make bequests of corporate stock int e r W . Example: I eave 1,000 s ares o ExxonMocommon stock to my grandson, Tim Jones.” Youmay also want to make a provision in this bequest sothat if the stock splits, or of the capital structure of ExxonMobil changes (such as if they are merged intoanother company), then this bequest would includethose additional shares acquired through the stock

split, merger, or acquisition.

Many of the Wills that we prepare do not include anybequests of particular assets. For example, a husband’sWill may provide, in general, that he leaves the usufructof everything that he owns at the time of his death tohis wife for her lifetime, and he names his children as

the naked owners. If you are not married, your Willmay prov e s mp y t at a o your assets at t e t me o your death will be divided equally among your children,



Paul Rabalais

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without listing the specifics of any of the assets that youcurrently own.

aming your executor

Besides providing for the proper bequests, naming your executor may be the most important provision in your Will. It’s your executor’s job to gather all of theinformation on the assets that you own at the time of your death, hire an attorney, make decisions regardingthe sale of your assets such as your home, vehicles,

stock and other assets, pay estate debts and overseethe distribution of assets to the heirs.

The executor must comply with all of the Louisianalaws that pertain to him. Penalties and personal liabilitycan result from an executor failing to perform withinthe required laws. A good executor can provide for an

orderly disposition of assets, while a poor executorcan cause your estate to rag on or mont s or yearsunnecessarily.

Who should you name as your executor? That’s agood question. It should be someone you trust, andsomeone who is organized, fair and trustworthy. If youare married, you may want to name your spouse as

your executor and one of your adult children as youralternate executor.

If you don’t have a spouse or adult child that wouldmake an appropriate executor, you can name a trustedfriend or other relative to serve as your executor. Youcould also name a corporate trust department, CPA,

attorney, or other trusted advisor as your executor.You can a so name two or more peop e to serve as co-executors. If you have two children, you could namethem as co-executors. Many parents do this because




44

they don’t want to hurt a child’s feelings by leaving themout. Don’t name co-executors unless you feel that theycan work well together.

Allow your executor to be “independent”

It’s important to provide that your executor (or co-executors) may serve as an “independent” executor. If in your Will, you state that your executor may serve as anindependent executor, it will be easier for your executorto settle your estate because an independent executor

does not need to constantly seek court approval to actlike an executor that is not an “independent” executor.

xample: In Ralph’s Will, he stated that his daughter,Heidi, could serve as independent executor. After Ralphdied, it was necessary for Heidi to sell Ralph’s twovehicles, his boat, his trailer, and other assets. Since

she was named independent executor, she did not needto see an o ta n court approva or eac sa e. W enshe found a buyer for these items, she could sell themimmediately. If she was not named as an “independent”executor, she would have had to have retained hersuccession attorney to petition the court to sell theseitems each time she wanted to sell something incurringadditional delay and expense.

Using Trusts in your Will

Many people include trusts in their Wills. These trusts arecommonly referred to as “testamentary trusts” becausethe trust is included in your last will and “testament.”

While there are many uses for testamentary trusts,two o t e most common nc u e 1 prov ng or t emanagement of your assets after your death for your



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heirs; or (2) married couples using trusts in their Willsto avoid federal estate tax.

Using testamentary trusts to manage assets

Let’s say you want to leave your assets to your childrenut they are not yet mature or responsible enough to

handle a lump sum of money property (some people arenever that mature or responsible). You and your spousehave two children—ages nineteen and sixteen. You and your spouse have accumulated assets totaling $800,000

in value. You don’t think that each of your children arecapable of handling $400,000 prudently. So, in yourWill, you provide that the children’s inheritance, if theyare younger than age 30 (or whatever age you choose)at the time of your death, will be placed in trust. You will name a trustee of the trust and you will give thattrustee certain powers, such as the power to buy and

sell trust assets and the power to distribute assets to your c ren or t e r ea t , e ucat on, an genera welfare, prior to the termination of the trust.

Using a testamentary rust to avoid estate tax

Married couples often include testamentary trustsin their Wills to help avoid estate tax. The estate tax

exemption for the year 2007 is $2,000,000, so fewerfamilies are subject to this tax than before when theestate tax exemption was $600,000.

Nonetheless a married person can leave his or her estaten trust, name the surviving spouse as the incomeeneficiary of that trust, and follow other requirements,

and there will be no federal estate tax required to bepa at t e eat o t e rst spouse to e. s rusis commonly referred to as a bypass trust or a QTIPtrust. This estate tax avoidance technique can also be




46

accomplished by leaving your spouse the usufruct of your assets for the rest of your spouse’s lifetime.

ther common provisions in Wills

Survivorship provision. Many people ask, “What if Ileave an inheritance to someone and that person diesright after me? Well, you can include a survivorshipprovision in your ill so that you can control wherethe inheritance goes if your legatee dies right after you.You can provide in your Will that the bequests in your

Will are not effective unless the legatee survives you fora certain period (six months is the maximum period of time).

ollation. Sometimes a parent with more than one child will, during his or her lifetime, financially help one childmore than the other. The parent may feel that it’s fair

to reduce the inheritance of that particular child thatrece ve g ts ur ng t e parent s et me. e parentmay provide in his or her Will that certain gifts made tochildren will be subject to collation so that those giftsmade to those children will be counted as an advanceon their inheritance.

rovisions Not to Include in Wills

There are certain things related to planning for deaththat should not be listed in the last will and testament.Your ill may not be read until days or even weeks after your death when it’s too late to abide by your wishes. The following are examples of items that should not belisted in your Will.

rgan Donation. I you w s to e an organ onor, you should do so by filling out and signing thenecessary information provided by the Louisiana



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Organ Procurement Agency at www.lopa.org, as well asdocumenting that you are an organ donor on the backof your Louisiana Driver’s License.

Decisions regarding life support machines. Yourliving will is the proper place to document your decisionregarding life support machines, not your last will andtestament.

Beneficiary Designation items. Individual retirementaccounts, 401(k) plans, life insurance and annuities are

transferred to the persons designated on your beneficiarydesignation form held by the financial institution orinsurance company. Do not make a bequest of an IRAn your Will.

xample: Don has an IRA worth $250,000. In his Will,he stated that he wanted his IRA to go to his son, Jason.

However, when Don opened his IRA account, he nameds aug ter, Em y, as t e ene c ary o s IRA. A terDon dies, the financial institution will deliver the IRAfunds to Emily even though Don stated in his Will thathe wanted those funds to go to Jason.

ersonal effects. The proper disposition of personaleffects can be tricky. It’s simple to divide a $100,000

ank account between four children (each child gets$25,000), but it’s not so simple to divide up your jewelry,china, furniture, tools, guns, family photos, and otherpersonal effects among multiple heirs. There are two ways to provide for the disposition of your personaleffects: inside your ill or outside your ill.

Disposing of your personal effects in your Will

One way to dispose of your personal effects is to makeequests of these items in your Will. You might say




48

something like, “I leave my diamond engagement ringto my daughter, Jenny.” Or you might say, “I leave all of my tools to my son, Jason.”

D spos ng o your persona e ects n your W canbe burdensome. You have to list all of these items in your Will and you have to list who you want to inheritthese items. If you change your mind or if you acquireadditional items that you’d like to bequeath, you haveto change your Will.

However, if you think there is a chance that your heirsmay fight over your personal belongings, then it maybe best if you bequeath them in your Will, particularlyif they have significant fair market value or significantsentimental value to your heirs.

Disposing of your personal effects outside your Will

Some peop e w attempt to spose o t e r personaeffects outside of their Will. They might place a stickynote on each item which states who gets each item, orthey may make a separate list in their own handwritingand change it from time to time. Or they may simply asktheir children to work it out, or take turns picking items. There is no limit on the number of ways personal items

can be passed along to your loved ones. This informalmethod can work well, particularly if your heirs getalong well and can agree on an orderly disposition of these items.

Whichever way you choose to dispose of your personalitems, it’s important to communicate your desires rather

than leave it up to your heirs to make all the decisions.

When you prepare your Will, it’s important to keep thesethings in mind:



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There are two forms of valid Wills in Louisiana:olographic and notarial. Most Wills are notarial

Properly describing your bequests may be the

most important part of your ill C oos ng your n epen ent executor s a so animportant decision to document properly

It may be helpful to include a testamentary trustin your Will

Other important provisions to include in your Willare survivorship provisions, contingent bequests,and whether you want lifetime gifts collated

There are certain provisions that should not be in your Will



Chapter 7

rotect Your Children andGrandchildren

How to preserve your assets from

taxes, long term care costs, and

your children’s divorces and poor

spending habits

Many people engage in estate planning to protecttheir estates for their children and grandchildren.

The failure to properly plan your estate could result inany of the following:

The wrong people raise your children if you dieefore your children reach the age of majority

Your e rs ow t e r n er tance ecause t ey were not mature enough to handle it properly

Your children have to split their inheritance withtheir spouse when your children get divorced

Your loved ones have to make difficult medical

decisions for you—like the removal of life supportsystems—with no previous guidance from you




2

• Your children have to go to court to fight othersto get legal authority to manage your affairs when you become incapacitated

•

Your executor must pay considerable federalestate tax w t n n ne mont s a ter your eat• They have to post a bond to become the executor

of your estate and they have to get a judge’spermission to sell your home, car, or other assetsafter you die.

Proper estate planning can avoid most, if not all, of these

problems for your children or grandchildren (or anyoneelse you intend to benefit with state planning).

uardians For Minor Children

Parents with children under the age of eighteen need to write their Will so they can designate who will raise the

children if the parents die before their children reacht e age o ma or ty w c s age18 n Lou s ana .

In Louisiana, you can designate who you want yourchildren’s “tutor” to be if you and the other parent diebefore the child reaches the age of 18. If the parent’sare divorced, the last surviving parent has the right todesignate who will be the minor child’s tutor. The failure

to designate the tutor for your children will result ina judge designating a tutor. Your choice for who canbest raise your child or children may be different thana judge’s choice.

reating a estamentary Trust for Young Children

If your children are young, or if they are not yet matureenoug to an e a ump sum n er tance, t en youshould designate in your ill that when you die, yourassets will be placed in trust. This helps ensure that



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3

your child’s inheritance will be managed by the rightperson and used for the right reasons. A testamentarytrust for minor children will also avoid the expensive

and difficult tutorship proceeding which applies when am nor n er ts property.

xample: Mark and Colleen have two minor children.Mark dies unexpectedly. Colleen decides to sell theirhome. However, since Mark did not have a ill whichshould have included a testamentary trust for theirtwo children, Colleen was prevented from selling their

home right away until she paid thousands of dollars inattorney fees and court costs to get herself confirmed asthe tutrix of Mark’s children and to get court permissionto sell the children’s interest in their father’s home.

If Mark, in the previous example, had written a Will which had included a testamentary trust for his

children naming Colleen as trustee, then Colleen wouldave een a e to se t e ome s ort y a ter Mar sdeath without having to spend a fortune on the difficulttutorship proceeding. Mark’s half of the home wouldhave been retitled into Colleen’s name as trustee of Mark’s children’s trust, and Colleen would have beenpermitted to sell the home without having to get courtapproval to do so.

Forced Heirship

Louisiana is the only state that has forced heirship.However, forced heirship laws have changed over the years.

In the past, all children were forced heirs and could note exc u e rom rece v ng part o t e r parent s estate.Now, forced heirs are defined, in general, as children 23




4

years of age or younger, or children of any age that areincapable of administering their own estate.

xample: Steve dies survived by a wife and three childrenages 28, 2 an 20. Steve equeat e s ent re estateto his wife in his Last Will and Testament. Steve’s 20 year old child is a forced heir and has a right to claim aportion of his father’s assets.

If a person dies with one forced heir, then that forcedheir is entitled to the forced portion of one-fourth of

the deceased’s estate. If a person dies with two or moreforced heirs, then those forced heirs are entitled to divideone-half of the deceased’s estate.

revent Your Children and Grandchildren FromWasting Their Inheritance

n inheritance is typically not earned. Children andgran c ren o ten oo at an n er tance as a ree e.You often read about lottery winners squandering awaytheir winnings. People who receive an inheritance areno different. Since they did not work for or earn theirinheritance, they don’t value the money as much as youmay value it.

xample: Leonard and Jackie worked their lifetime tobuild their estate of $600,000. They clipped coupons,bought items that were on sale, and avoided travel,eating out and other luxuries because they said thesethings were “too expensive.” When Leonard and Jackiedied, their two children each inherited $300,000. Theirson, Billy, immediately purchased a new boat, a new

truck, and many other items that years later had nova ue.



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Leonard and Jackie could have arranged their Wills sothat upon their deaths, their assets would have beentransferred to a trust. Leonard and Jackie could have

named a trustee (either an individual or a corporatetrustee to manage t e assets or t e r c ren. etrust might say that the children receive all of theincome from the trust assets, and the trustee can givethe principal to the children for their health, educationor general welfare. Perhaps the trust would also providethat the children would receive one-half of the trustassets when they reach the age of forty, and the rest of

the trust assets when they reach the age of fifty.

This type of trust is called a testamentary trust. Theterms of the trust are n your last will and testament,and the trust owns no assets until you die. There aremany different ways to set up a testamentary trust, butthe most important decisions typically are:

W o w e t e trustee? You can ave one trusteeor multiple co-trustees. The trustee can be anindividual or a corporate trustee such as a banktrust department.

When can trust principal be used? You can providethat trust principal can be used for educationonly, or you can broaden it to say that principal

can also be used for the health or general welfareof the beneficiary. There are few restrictions.

How long will the trust last? You can provide thatthe beneficiaries will receive the trust principalat a certain age (such as 25), or you can give thetrustee discretion regarding when the beneficiary will receive the trust assets.

rotect Your Children from Their Divorces

The divorce rate is higher now than it was 30 or 40 yearsago. While it’s uncommon for a couple that has been




6

married for 40+ years to get divorced, it is common thatone or more of their children will be getting divorced.

By definition, an inheritance that your child receivess s or er separate property. However, your c sinheritance will quickly become community property co-owned with your son-in-law or daughter-in-law unlessit’s handled properly. If your son or daughter later getsdivorced after receiving this inheritance, he or she maybe required to split this inheritance with his or her ex-spouse.

xample: Jason received an inheritance of $400,000from his parents. His parents saved their entire lifetimeso Jason could benefit from the inheritance. Thisinheritance initially is Jason’s separate property. Jasoninvests the money. These investments produce interestand dividends. The interest and dividends from Jason’s

separate property are community property owned equally y Jason an s w e. e commun ty property anseparate property get mixed up together so that no onecan accurately determine what is separate property and what is community property. When this happens, it allbecomes community property due to the presumptionin Louisiana law which provides that all assets in thename of either spouse are community property.

One way to protect your children from having to splittheir inheritance when they divorce is to provide thatthe inheritance for each child of yours will be put intrust. This will make it more likely that the inheritedassets will not be commingled with commun ty propertythat your child owns with his or her spouse.

not er way your c ren can protect t e r n er tancefrom divorce is to sign a document whereby theydeclare that all income from their separate property is



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their separate property. This document will need to berecorded in the parish records to be effective, but it willkeep income from separate property being classified as

commun ty property.

Using Powers of Attorney

One of the best legal strategies you can employ for yourchildren is to sign a power of attorney which makes iteasier for one or more of your children (or some otherperson you designate) to handle your affairs for you if you

are unable to handle your own affairs. Simply executinga properly prepared power of attorney may prevent yourchildren from having to go through the burdensomeinterdiction proceeding often required when someoneecome incapacitated without previously executing a

power of attorney.

xample: George is widowed with three children. Georgeowns an IRA w c e ta es per o c str ut ons rom when he needs living expenses. George suddenly has astroke which renders him unable to sign his name orunderstand that he needs funds to live on. Since Georgehad not previously executed a power of attorney, one ormore of his children are forced to hire attorneys to suetheir father, have him declared legally incompetent, and

obtain the authority to act for him. In Louisiana, this cane a proceeding which takes months or years and costs

thousands of dollars. If George had previously executeda power of attorney, then the person of George’s choosing would be able to continue to manage George’s assets forhim just as if George were doing it for himself.

If you are married, you are likely to designate yourspouse as t e rst person to ave aut or ty to act or you on your power of attorney, and you may designate




8

an adult child or children as the alternate if your spouseis unable to act for you.

Sign a Living Will

The Terry Schiavo matter in Florida brought a great dealof attention to living wills. You can designate in a living will (also known as a “Declaration”) your intentionsregarding the withdrawal or withholding of life supportmachines if you are in a profound comatose state withno reasonable chance of recovery. By signing a living

will, you’ll be making your own decision regarding lifesupport machines and making that decision known to your family and your doctors.

Children of elderly parents often have a sense of relief when their parent on life support machines hadpreviously signed a living will. The children do not want

to make that final decision for their parent to withdrawe support mac nes, an t s eas er or am y mem ers when the patient has previously executed a living willstating his or her intentions regarding the life supportmachines.

reserving Your Assets from the Cost of Long Termare

xample: Ernest and Elizabeth have accumulated assetstotaling $300,000 over their lifetime. They discover thatif they have to move to a nursing home because theyneed assistance with their daily living activities due toan illness such as severe arthritis or Alzheimer’s disease,it will cost each of them about 4,000 each month to

live in the nursing home. They realize that paying fornurs ng ome costs or two to t ree years w ep etetheir life savings.



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You have a few options regarding the payment of yourlong term care expenses:

. You can pay for them yourself until you run outo money an t en ope u y you w qua yfor Medicaid which will pay your nursing homeexpenses;

. You can purchase long term care insurance which will pay for some or all of the cost of your care.Many senior citizens either don’t want to purchaselong term care insurance because they feel it is

too expensive, or they cannot purchase it becausethey do not pass the medical underwriting testsrequired by the insurance company; or

. You can carefully engage in Medicaid planning which often involves transferring ownership of certain assets to other family members or certaintrusts.

W c ever met o you c oose, ma e certa n you u yunderstand your options before you act. Making the wrong move can be worse than not acting at all.

Minimizing Taxes

You can help your children or other heirs by planning

your estate so that federal estate taxes, capital gainstaxes, and income taxes are minimized.

The federal estate tax exemption increased from$1,500,000 to $2,000,000 on January 1, 2006. Thisincrease in the exemption will preclude many estatesfrom having to pay federal estate tax. If you have an

estate exceeding 2,000,000, there may be estate taxp ann ng tec n ques ava a e to you, suc as annuaexclusion gifts, transfers to a spouse, or charitable




60

giving techniques that can reduce the amount of federalestate tax your estate will be required to pay.

Under current tax law, the capital gains tax basis of your assets w e steppe -up w en you e.

xample: Over the years, Rod purchased IBM stock.He paid a total of $60,000 for the stock. At his death,the stock Rod had purchased had a fair market value of $260,000. Had Rod sold the stock just before his death,there would have been $200,000 of taxable capital gain.

However, Rod did not sell the stock. When he died andleft the stock to his children, the children inherit thestock with a new stepped-up basis of $260,000. If thechildren sell the stock for $260,000, there will be nocapital gain and thus no capital gain tax.

If, however, you give appreciated assets to your children

during your lifetime, they will receive a “carry-over”as s. So Ro a g ven t e stoc to s c renbefore he died, their basis would have been $60,000,and there would be considerable capital gains tax dueon their sale of the stock for $260,000.

You can help your children minimize income taxesas well. If your IRA beneficiary designations are set

up properly, your children can elect to take taxabledistributions over their lifetime, minimizing the incometax they will have to pay in the years immediately after your death.

Allow xecutor To Serve as Independent xecutor

Laws were recently passed in Louisiana authorizinga s mp er orm o pro ate n Lou s ana. Un er t eold system, your executor would have to get courtapproval after your death to pay the estate’s debts or



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to sell the estate’s assets. This is time consuming andcomplicated.

Now, if you’ve authorized your executor, n your Will,to act as an n epen ent execu or, your executor we able to sell succession assets and pay succession

debts without having to go to court to get approval froma judge to do so. You can make matters easier for yourchildren or executor if you’ve designated in your Will that your executor may serve under this easier “independentadministration” procedure.

onclusion

You can protect your children and grandchildren by:

Naming guardians in your Will for your minorchildren so the person you choose can raise your

children Bequeat ng your estate n trust or your c renso they can benefit from their inheritance for therest of their lifetime

Making your children’s inheritance divorce proof Complying with Louisiana’s forced heirship laws Signing a power of attorney and living will so your

children won’t be burdened with difficult decisions

upon your disability Preserving your assets from the cost of long term

care Minimizing or avoiding federal estate tax and

Lou s ana inheritance tax



Chapter 8

Multiple Marriagesrotect your second spouse AND

your children from your first spouse

T he Louisiana community property laws work well formost traditional Louisiana families. The husband

and wife have children. After both the husband and wifedie, their combined assets are typically divided equallyamong their children. It can be pretty cut and dried.

We now live in a society where it’s “normal” for peopleto get married two or more times. It’s not uncommon,and often encouraged, for surviving spouses to remarryafter the death of their first spouse. Many people get adivorce and then marry someone else.

Proper estate p ann ng s cr t ca n mu t p e marr agesituations—particularly when each spouse has childrenfrom a prior marriage.

Typical Example Which Excludes the Children

Larry and Martha get married at age sixty. They eachhave two adult children from their prior marriages.Larry wants to provide for both his new wife and his




64

two children. He writes a Will leaving everything heowns to his wife. He also stipulates that if Martha diesbefore him, he wants everything he owns to go to his

two children when he dies. Larry dies and all his assetsgo to Mart a. W en Mart a es ve years ater, s eleaves everything she owns to her two children. Larry’stwo children get nothing.

ommon Example Excluding the Spouse

Steve and Dot get married at age sixty. Steve brings

into the marriage assets worth $1,000,000, includingthe home Steve and Dot live in. Dot’s assets are lessthan $100,000. Steve has three children from his priormarriage. Steve wants to provide for Dot and his threechildren when he dies, but he doesn’t get his affairsin order. When Steve dies unexpectedly, all of Steve’sassets, including the home and other assets Steve

brought into the marriage (these assets are his separateproperty ecause e roug t t em nto t e marr age aretransferred to Steve’s three children under the intestatelaws, and Dot must move out of the home. Dot will haveno financial support for the rest of her lifetime.

Much of the bickering that takes place over an inheritanceoccurs when children and their step-parent fight over

a deceased’s assets. The relationship that a child has with his or her step-parent, in general, is often not asstrong as the relationship a child has with his or hersurv v ng parent.

ommunity Property Rules Confuse Uninformed

Married people often mistakenly believe that if theyeac eep t e r accounts n t e r own name, t ey wavoid problems upon a death or divorce because they



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each have their own accounts. Louisiana commun typroperty laws, however, don’t work that way.

The following is an example of what can, and does, go wrong w en coup es on t p an proper y:

. When Dan gets married to Jackie, he hasaccounts totaling $500,000 in his name only. Atthe moment he gets married, those accounts areDan’s separate property because he owned themprior to his marriage.

. During Dan’s marriage, his accounts produce$175,000 of interest and dividends, whichget added to his accounts. These “fruits” arecommunity property even though they are inDan’s name only.

. Dan worked during the marriage and he deposited150,000 of his wages into his accounts. Wages

are community property even though they aret e resu t o Dan s e orts an are epos te ntoDan’s accounts.

4. Dan and Jackie spent some of the money inDan’s accounts during their marriage on traveland other expenses. When Dan died, there was$400,000 in Dan’s accounts, consisting of cashand certificates of deposit. Dan died without a

Will, but he wasn’t concerned about the lack of aWill because of Louisiana’s intestate laws whichprovide that Dan’s separate property goes to hischildren when he dies. Dan and his children bothunderstood that Dan wanted these accounts to goto his children when he died.

5. Were Dan’s accounts his separate property when

he died? Not likely. There is a presumption of commun ty property n Lou s ana, an w encommunity property (such as fruits and wages)get mixed with separate property (assets brought




66

into the marriage), it may be determined that allof the funds become commun ty property.

. If Dan’s accounts total 400,000, and he died

intestate and the accounts are commun typroperty, Jackie owns 200,000 (as her half of the community) and Jackie gets the usufruct of Dan’s $200,000 until Jackie dies or remarries. Atthat point, Jackie, or her estate, will owe Dan’schildren $200,000.

ommunity Property Rules

It’s important for married couples and their adultchildren to understand how Louisiana communityproperty laws apply. Proper planning and educationcan eliminate unnecessary bickering that often occursupon the death of a person who had children from apr or marr age.

Definitions

Community property rules apply to all married couplesin the State of Louisiana. Everything that marriedpeople own is either community property or separateproperty.

ommunity Property

Each spouse owns a one-half interest in the communityproperty. Things in the possession of a spouse during theexistence of a marriage are presumed to be commun typroperty, but it may be proven that things are separateproperty. Community property consists of:

Property acqu re ur ng t e ex stence o t emarriage through the effort or skill of eitherspouse;



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Property acquired with commun ty property; Property donated to spouses jointly; Damages awarded for loss or injury to commun ty

property; and ot er property not c ass e as separa eproperty.

Common forms of community property include the wagesof a spouse, a business started during the marriage byone or both spouses, and any assets purchased withcommunity funds.

Separate Property

The separate property of a spouse is his or hersexclusively. Separate property includes:

Property acquired by a spouse prior to the

marr age; Property acqu re y a spouse w t separatethings;

Property acquired by a spouse by inheritance or adonation to him or her individually; and

Damages awarded to a spouse resulting fromfraud or bad faith of the other spouse.

Common forms of separate property include thingsacquired by a spouse prior to the marriage, an inheritance y a spouse, and a gift to one spouse.

Reservation of Fruits as Separate Property

Income derived from the separate property of a spouse

s commun ty property. However, a spouse may reservet s ncome as s or er separate property y s gn ng acertain type of declaration that meets the requirements




68

of Louisiana law and is filed in the conveyance recordsof the proper parish.

xample: Stan and Linda are married. Stan inherited10,000 s ares o ABC, Inc., stoc . e stoc pro ucesa quarterly dividend of $5,000 payable to Stan. Thisdividend is community property owned by Stan andLinda unless Stan signs the appropriate declarationand has it recorded in the parish where he is domiciled.

fter the declaration is recorded, the future dividends will be Stan’s separate property.

Marriage Contract

Many married couples, especially those marriedcouples who enter marriage with children from aprevious marriage, sign a marriage contract, alsoknown as a pre-nup, pre-nuptial agreement, separate

property agreement, or matrimonial agreement. Theseagreements typ ca y are use to a ow marr e coup esto deviate from the traditional community property rulesand often to provide that no community property willexist between the spouses and that all assets will be theseparate property of either the husband or the wife.

xample: George and Jane are getting married. George

has three children from his first marriage. Jane has twochildren. They sign a marriage contract which providesthat they will have separate property only. During themarriage, George has income both from his employmentand his investments. All of these earnings and assetscontinue to be George’s separate property. WhenGeorge dies, he leaves all of these assets to his three

children. Jane does not own any part of these assets ascommun ty property.



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If spouses enter into marriage contracts, they typicallydo it before their marriage. Married couples may onlyenter into these marriage contracts after marriage with

court approval. However, if a married couple has signeda marr age contract an t ey want to term nate t ansubject themselves to the community property rules,they may do so at any time without court approval.

Married Couples Moving to Louisiana

During the first year after moving to Louisiana, spouses

may enter into a marriage contract without courtapproval.

Last ill and Testament

Big mistakes are often made when married persons,particularly those who have children from a previous

marriage, leave all of their assets to their current spousen t e r W .

xample: Jude and Laura are each married for thesecond time. They each have two children from theirprior marriages. Jude wants to provide for his new wifeso he signs a Will leaving all of his property to Laura.He “trusts” that Laura will leave a substantial bequest

to Jude’s children. When Jude dies, all of his assets areput in Laura’s name. Jude’s adult children get nothing.Laura’s ill now provides that everything she owns when she dies goes to Laura’s two children. When Lauradies, Jude’s children get nothing.

There are basically three ways that a married person

can protect his children from a previous marriage:

. Leave bequests to your children directly, even if you die before your spouse does;




0

. Leave your spouse the usufruct of your propertyand name your children the naked owners; and

3. Leave your assets n trust for the benefit of your

spouse and your children.

Bequests To Children Directly

Even if you are married, you can bequeath assetsdirectly to your children if you want to make sure thatthey inherit from you.

xample: Dan and Carol are married. They are each intheir second marriage and they are each seventy-years-old. Dan has two condos and stock that he wants hischildren to inherit. Dan provides in his Last Will and Testament that he wants his four children to inheritthese condos and this stock. When he dies, these assetsget transferred directly to his four children.

Marital Portion

If in the previous example Dan died “rich” in comparison with his wife, Carol, Carol would have been entitled,under Louisiana law, to claim the marital portion fromDan’s succession. The idea is to prevent a spouse on thedeath of the other from being left in poverty after having

become accustomed to the wealth of the deceased.

The marital portion is one-fourth of the deceased’sassets if the deceased died without children, the samefraction in usufruct for life if the deceased is survivedby three or fewer children, and the marital portion is achild’s share in usufruct if the deceased is survived by

more than three children. In no event, however, can themar ta port on excee one m on o ars.



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xample: Richard dies leaving his entire $2,000,000estate to his two children. Rich’s wife, Nancy, has anestate of 50,000 at the time of Rich’s death. Nancy

may claim a marital portion of 500,000 from Rich’sestate. S nce R c a two c ren, Nancy w rece vethe lifetime usufruct of assets totaling $500,000 in valuefrom Rich’s estate. Rich’s children will receive the other$1,500,000 from Rich’s estate, and they will receive theassets over which Nancy has a usufruct when she diesor when her usufruct is terminated.

Bequeath sufruct to Your Spouse and Nakedwnership to Your Children

If you are married and you have children from a previousspouse, you may want to bequeath your spouse theusufruct of your assets, and bequeath your children thenaked ownership. This can protect both your spouse

and your children.

xample: Rob is married to Dot. Rob has four childrenfrom his first marriage. Rob owns a home, stock, and$200,000 of cash and bank accounts. In Rob’s Will, heleaves Dot the usufruct of his assets until she dies orremarries, and he leaves his four children the nakedownership of his assets. When Rob dies, Dot can continue

to live in Rob’s home, she will receive the dividends fromRob’s stock, and when she dies or remarries, she willowe Rob’s four children a total of $200,000.

Rob must be careful when structuring his Will. If he wants to make things easy for Dot, he will provide thatshe can have the usufruct without posting a bond, and

he will provide that she will have the authority to sellassets t at s e as t e usu ruct o w t out av ng toget the permission of Rob’s children. However, there isalways the chance that Dot could waste or squander the




2

assets and nothing would be left when Dot’s usufructterminates for Rob’s children.

If Rob does not waive the bond requirement, and if Roboes not g ve er aut or ty to se , t en Dot w not eable to sell the stock or the home without the children’spermission, and Rob’s children can force Dot (since Dotis not the mother of Rob’s children) to post a bond sothat their inheritance is protected.

Bequeath Assets In Trust for Your Spouse and

hildren

If you want to provide for your spouse and your children,particularly when your spouse is not the parent of yourchildren, you may want to structure your ill so thatassets are left in trust for them after your death.

xample: Instead of leaving Dot the usufruct of hisome, stoc , an cas , e eaves t em n trust or Dotand his four children. He names Dot as the incomebeneficiary of the trust for the rest of her lifetime, henames his four children as equal principal beneficiariesof the trust, and Rob names his son, Jimmy, as thetrustee of the trust. When Rob dies, all of his assetsare re-titled into the name of Jimmy as trustee of the

trust. Jimmy must see to it that all of the income suchas dividends and interest are paid to Dot, and he isauthorized to distribute to Dot enough principal to payfor her health, education, maintenance and support.When Dot dies, the remaining trust assets are dividedamong Rob’s four children.

llowing Dot to use the principal of the trust preventser rom av ng to re m urse Ro s c ren or t eprincipal that she uses. On the other hand, if Dot has theusufruct of $200,000 of cash, and she spends $75,000



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3

of it after Rob dies, she will still owe Rob’s children$200,000 at the termination of the usufruct.

Beneficiary Designations

If you have assets in an Individual Retirement Account(IRA) or a 401(k), or if you own life insurance or anannuity, you need to make certain that the beneficiarydesignations are set up properly—especially if you aremarried and you have children from a prior marriage.

xample: Joe retired from the local chemical plant after30 years of employment. When he retired, he rolled his401(k) into an IRA. In his Will, he left the usufruct of allof his assets to his second wife, Elaine, and he namedhis two children from his first marriage as the nakedowners. Joe wanted to provide for both his current wife and his children. However, he named Elaine as

the beneficiary of his IRA. His IRA, valued at 600,000 was s argest asset n va ue. W en e e , s ent reIRA went to Elaine. Elaine then rolled the IRA into anIRA in her name only and named her three children asthe beneficiaries to receive the IRA at her death. WhenElaine died, her children (not Joe’s children) receivedthe entire IRA.

To protect both his wife and children, Joe could havedone one of two things with the beneficiary designationof his IRA:

. Designate his wife as beneficiary of part of hisIRA (let’s say 50%) and designate his children aseneficiaries of the other 50%. Some financial

institutions require that your spouse consent in wr t ng w en you name someone ot er t an yourspouse as the primary beneficiary of your IRA; or




4

. Des gnate a trust as the beneficiary of your IRA, so your spouse can benefit from the trust while he orshe is alive, but at your surviving spouse’s death,

the trust assets (the IRA) go to your children (andnot to w omever your spouse may es gnate .

onclusion

If you or your spouse has been married more thanonce:

• void the trap of your separate property turninginto community property

• Consider a marriage contract prior to yourmarr age

• Take advantage of the Louisiana usufruct or truststo provide for your spouse and your children

• Use caution when designating beneficiaries of

retirement plans, life insurance and annuities



Chapter 9

Death and TaxesShakespeare said it best

Everyone wants to avoid tax. When many people thinkabout avoiding taxes, they think about avoiding

income tax. Louisiana residents have to be concerned with several types of taxes when they are planning theirestates. Some of the taxes that can be minimized includethe Louisiana Inheritance Tax, the Federal estate tax,the Louisiana ift Tax, the income tax, the capital gainstax, and the property tax.

hase Out of Louisiana Inheritance Tax

For many years, heirs owed the State of Louisiana aninheritance tax based on the value of their inheritance.

e n er tance tax rate range rom 2% to 10%, aseon the value of the inheritance and the relationshipetween the deceased and the heir.

In 1997, the Louisiana Legislature voted to phase outthe Louisiana Inheritance tax over a five year period.For deaths occurring after June 30, 2004, the LouisianaInheritance Tax does not apply if certain conditionsare met. To avoid Louisiana Inheritance Tax, certainsuccession pleadings must be filed with the court no




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later than the last day of the ninth month followingdeath.

Don’t Ignore the Succession

Sometimes years will pass after a death before the familysees an attorney to handle the succession. In the past,this was no big deal. The worst thing that occurred wasthe family had to pay interest on the unpaid inheritancetax that was due nine months after death.

Now, families can completely avoid Louisiana Inheritance Tax by having their attorney file the necessary documentsat the courthouse within nine months after death.

xample: Max left his entire estate of $500,000 to hisfriend, Sam. Ten months after Max died, Sam went to seean attorney about completing all of the estate matters.

Sam was told that because the proper paperwork wasnot filed timely, Sam owed about 10,000 of LouisianaInheritance Tax. Had Sam started the process earlier, he would have completely avoided Louisiana Inheritance Tax.

Revocable Living Trusts

If all of the deceased’s assets are titled in the name of arevocable living trust, there may be no need to completea succession. The succession is necessary when thedeceased owned assets in her or her name that need tobe transferred to the heirs. If the assets are titled in thename of the revocable living trust, the trust documentdictates the disposition of those trust assets after the

death of the person who established the trust.

ssets in a revocable living trust are subject to theLouisiana Inheritance tax. However, for deaths occurring



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after June 30, 2004, no inheritance tax shall be due if atrust declaration is filed with the Department of Revenuestating the name, address, social security number, date

of death, a statement that the succession has not beenopene , an ot er requ re n ormat on.

Avoiding Louisiana Inheritance Tax

For deaths occurring after June 30, 2004, familiescan completely avoid Louisiana Inheritance tax bymaking certain that the succession is filed at the parish

courthouse within nine months after death. If you arelate with these filings, the heirs may owe tax on theirinheritance.

Federal state Tax

The federal estate tax applies in every state including

Louisiana. When it applies, it is usually significant.Essent a y, w en a person es, we ave to a upthe fair market value (as determined by appraisalor otherwise) of everything the deceased owned— their house, cars, bank accounts, IRAs, 401(k)s, lifeinsurance, stock, businesses they own, other real estate,and much more—and if the value of those assets exceedan exemption amount ($2,000,000 for deaths occurring

in 2006, 2007, and 2008) there may be federal estatetax due on the amount in excess of the exemption. Thetaxed portion will be taxed at a rate of about 45%.

For many years the estate tax exemption was $600,000and many more estates were subject to the federal estatetax. As the exemption has increased to 2,000,000,

it has decreased the number of estates subject to theax.




8

alculating Federal state Tax

Essentially, when a person dies, the xecutor s

responsible for determining the total value of the assetst at t e ecease owne on t e ate o s or er eat .If the gross value of the assets exceeds the exemptionamount, a federal estate tax return must be filed by theexecutor within nine months after the death.

The estate tax return is complicated to most people. If the deceased owned a business, a home or other real

estate, appraisals must be obtained and attached tothe estate tax return filed with the Internal RevenueService.

ll of the investments and financial accounts must bereviewed to determine date of death values, and thosevalues must be listed on the return.

e estate s ent t e to e uct certa n tems e orecalculating the net estate. Common deductions includedebts the deceased owed on the date of death, costs toadminister the estate, bequests to a surviving spouseand bequests to charitable organizations.

xample: Ralph died on January 15, 2007. He and his

wife Theresa together owned a home worth $500,000,an investment account valued at $3,500,000, an officecondominium worth $1,000,000, and miscellaneousother assets such as vehicles and bank accounts totaling$300,000. The total value of their commun ty property was $5,300,000. Ralph’s half of the commun ty property was 2,650,000. Ralph’s gross estate was 2,650,000.

In Ralph’s ill, he left his half of the home ( 250,000)and condominium ( 500,000) to his wife, Theresa, andhe left everything else he owned to his children. Since hisestate received a $750,000 deduction for the bequests



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to his surviving spouse, Ralph’s net estate was valuedat $1,900,000, and no federal estate tax was due.

t first glance, the deduction for bequests to the survivingspouse soun s e a great t ng. W en t e rst spousedies, estate tax can be completely avoided by leaving theassets to the surviving spouse—regardless of the valueof the deceased spouse’s assets. This rule is known asthe unlimited marital deduction.

The problem families face is that there may be significant

tax liability when the surviving spouse dies.

xample: Stan and Martha have a total communityproperty estate of $5,000,000. Stan dies in 2006 with aWill leaving everything he owns to Martha. Stan’s grossestate is $2,500,000. Stan’s net estate is $0 since he lefthis entire estate to Martha. Martha is pleased since no

tax is owed after Stan’s death. The problem, however,s t at w en Mart a es n 2008 eav ng er estate totheir children, the estate will owe about $1,500,000 inestate tax within nine months of Martha’s death.

How Married Couples Avoid state Tax

There are many estate tax planning techniques that

individuals and married couples can utilize. One of those techniques is to have the Will set up properly tomake certain that each married person’s estate utilizests max mum estate tax exemption. This allows marriedcouples who die in 2006, 2007, or 2008 to exempt$4,000,000 from the federal estate tax, because eachestate is entitled to a 2,000,000 exemption—but you

have to have things set up just right.

The two common ways couples arrange their Wills toavoid state tax are:




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1. Giving your spouse the lifetime usufruct of yourestate; or

. Leav ng your estate n a Q IP trust for the benefit

of your surviving spouse.

Avoiding state Tax By Giving Lifetime sufruct

xample: Jack and Margaret have community property worth $6,000,000. John dies in 2007 with a ill leavingthe usufruct of his estate ($3,000,000) to Margaret andhe provided that the usufruct would last for the rest

of her lifetime (her usufruct does not terminate uponremarriage). Jack’s bequest to Margaret qualifies forspecial treatment under the Internal Revenue Code. Jack’s executor must file a federal estate tax return within nine months after Jack’s death. Jack’s estate will utilize its $2,000,000 estate tax exemption. Theexcess 1,000,000 will not be subject to estate tax, but

it will be added to Margaret’s estate and be included inMargaret s estate w en Margaret es. No estate tax sdue at Jack’s death. Margaret now owns her half of thecommunity property (worth $3,000,000) and the amountof Jack’s estate in excess of his $2,000,000 estate taxexemption will also be included in Margaret’s estate,so Margaret now has a taxable estate of $4,000,000.When Margaret dies Margaret can use her estate tax

exemption to shield her estate from tax as well.

The lifetime usufruct qualifies for special estate taxtreatment. The theory is that married couples who planproperly are not forced to pay federal estate tax when thefirst spouse dies, regardless of the value of the estate.It’s fairly simple, with proper estate planning and proper

estate administration at death, to avoid state tax whent e rst spouse es. Most sop st cate es a e axplanning for married couples involves avoiding estatetax at the death of the surviving spouse.



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Intestate Usufruct— state Tax Owed

If in the previous example, Jack had died intestate

(without a Will), Margaret would have inherited theusu ruct o Jac s commun ty property unt er eator remarriage. Since her usufruct was not for lifetimeonly, the usufruct did not qualify for the favorable estatetax treatment and about $500,000 of estate tax would beowed to the IRS within nine months after Jack’s death.

Avoiding state Tax By Using QTIP Trusts

The second way Louisiana married couples avoid orminimize federal estate tax is to provide that at the firstspouse’s death, the first spouse’s assets remain in trustfor the surviving spouse’s lifetime. If the trust languageprovides that the surviving spouse is entitled to theincome from the trust assets for the rest of her lifetime,

and other rules are complied with, then estate tax cane avo e at t e rst eat , s m ar to t e way tax savoided when the lifetime usufruct is utilized.

QTIP stands for qualified terminable interest property.Other terms often used in conjunction with this type of trust include credit shelter trust, bypass trust, maritaldeduction trust, and QTIP trust. The terms of these trusts

can be spelled out in the deceased’s revocable livingtrust or in the deceased’s last will and testament.

ifts of 12,000

You may have heard that you can donate or give $12,000(it used to be 10,000) to people each year without tax

consequences. Many people are confused by this rule.




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Typically no one pays income tax on a gift regardless of the value of the gift. A sizable gift, however, will have giftand estate tax consequences.

xample: A ce wr tes a c ec paya e to er aug ter,Suzanne, for $112,000 February 1, 2007, to helpSuzanne buy a home. This gift has no income tax effectto either Alice or her daughter, Suzanne. No income taxis due as a result of the gift. The primary tax effect,however, is that Alice has made a $100,000 taxable gift.Gifts of $12,000 or less each calendar year need not

be reported, but the fact that Alice gave $112,000 toSuzanne must be reported on a federal gift tax return(IRS Form 709), showing, among other things, that Alicehas used $100,000 of her $2,000,000 federal gift andestate tax exemption. If Alice dies in 2008, her estatetax exemption (the amount exempt from federal estatetax) will be 1,900,000 instead of 2,000,000 because

she used part of her estate tax exemption during heret me.

Many people who make gifts to others in excess of $12,000in a calendar year do not have an estate that exceedsthe applicable estate tax exemption of $2,000,000, sothere really is no tax consequence at all to making largegifts other than the requirement of filing a federal gift

tax return disclosing that the gift was made.

Louisiana ift Tax

The State of Louisiana has its own gift tax. Here’s howit works. Individuals can give $12,000 to as manypeople as they want to each year (just like the federal

tax). In addition, individuals have one 30,000 lifetimeg t tax exc us on t at can e use . I g ts excee t eseamounts, Louisiana gift tax is due at the rate of 2% of the first $15,000 of taxable gifts and 3% thereafter.



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xample: During one calendar year, Fred and Gingerdonated $50,000 to each of their three children (a totalof 150,000 donated). Fred and Ginger can each donate

12,000 to each of their children free of Louisiana gifttax (a total of 72,000). Fred and Ginger can also eachuse their $30,000 lifetime exclusion (another $60,000).So, the first $132,000 gifted avoids Louisiana gift tax.Fred and Ginger each made donations of $9,000 that would be subject to a 2% Louisiana gift tax. This must

e reported on a Louisiana gift tax return. Fred andGinger each owe the State of Louisiana $180.

state Tax Avoidance Techniques

Much has been said and written about avoiding federalestate tax. The increase in the estate tax exemption from$600,000 to $2,000,000 will exclude many estates fromeing subject to the tax. However, for those families

that are still subject to the estate tax, the following arepopu ar estate tax p ann ng too s:

. Prepare Your Will Properly. For many people(especially married couples), having your LastWill and Testament conform to the estate taxlaws will avoid estate tax completely. The lifetimeusufruct allows married couples to exempt up to

$4,000,000 from estate tax.. Annual gifts. You can give away $12,000 to as

many people as you want to, every year, to reduce your estate. If you have four children and eightgrandchildren, you could (if you wanted to) reduce your taxable estate by $144,000 each year bymaking 12,000 gifts to each of them.

. Use Life Insurance To Pay Estate ax. Onestrategy nc u es ma ng g ts to an Irrevoca eLife Insurance Trust. The trust purchases lifeinsurance on your life. You are not reducing your




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estate tax by purchasing life insurance, but youare making gifts to children or others and thegifted money is used to purchase life insurance

on your life that might pay the estate tax liability w en you e.4. Gifts and Bequests To Charity. What you leave to

a qualified charity completely avoids estate tax. If Bill Gates and his wife leave their entire estate totheir charitable foundation (or any other qualifiedcharity) no estate tax will be due at their deaths. There are many ways to donate or bequeath money

to charity—some simple and some complex.

onclusion

You can’t avoid death, but you may be able to minimizeor avoid death tax by:

•

Making sure your estate utilizes its 2,000,000exempt on ava a e or eat s occurr ng n 200and 2008

• Filing the appropriate succession documents within nine months of a loved one’s death to avoidLouisiana inheritance tax

• Properly setting up—if you are married—your Willor your Revocable Living Trust so there will be not

tax upon the death of the first spouse regardlessof the size of the estate.

• Utilizing annual exclusion gifts during yourlifetime of $12,000 to your heirs to reduce yourtaxable estate at your death



Chapter 10

UsufructWhat in the heck is a “usufruct?”

Usufruct is a term used almost exclusively inLouisiana. Very few, if any, of the national books

and publications on estate planning even mention theterm “usufruct.”

However, usufruct is a common term in Louisiana,especially among married couples. When a marriedperson dies, the surviving spouse often inherits theusufruct of the deceased spouse’s assets.

xample: Bill and Mary have been married for years.

They have two grown children. They have a home worth200,000, two cars each worth 15,000, 1000 shares

of ABC Corp. stock valued at 60,000, and their bankaccounts and CDs total $300,000. Bill dies intestate(without a ill). Since Bill died intestate, Mary continuesto own her one-half of their community property,and Mary inherits the usufruct of Bill’s one-half of the community property until she dies or remarries, whichever occurs first. Bill’s children inherit the nakedownership of Bill’s half of the community property. Whatare Mary’s rights and obligations as usufructuary, and




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what are their children’s rights and obligations as nakedowners?

What is a sufruct?

usufruct is a right that a person has for a certainperiod of time on the property of another person. Thefeatures of the right of usufruct vary with the nature of the things subject to it.

Usufruct of Consumable Things

Consumable things are those that cannot be used withoutbeing spent or consumed, such as bank accounts,certificates of deposit (CDs), promissory notes, moneymarket accounts and cash.

If the things subject to the usufruct are consumables,

the usufructuary becomes the owner of them. She canspen t em or se t em. At t e term nat on o t eusufruct she must give the naked owners the value thatthe things had at the start of the usufruct.

When Bill died intestate in our example, he and Maryowned $300,000 of bank accounts. Bank accounts areconsumable things. Mary continued owning her one-

half of these accounts ($150,000) and she inherited theusufruct of Bill’s one-half of these accounts ($150,000).Mary can do whatever she wants with the entire$300,000, but at the termination of the usufruct—whenshe dies or remarries—she (or her succession) must payto the naked owners (Bill’s children) a total of $150,000.Even if Mary invested the 300,000 and caused it to

increase to 500,000, she still owes the children atotal of 150,000 at the termination of the usu ruct.nd if Mary spent some of the $300,000 so that at the



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termination of the usufruct there was only $175,000left, she still owes Bill’s children a total of $150,000.

Usufruct of Nonconsumable Things

Nonconsumable things are those that may be enjoyed without alteration of their substance, although theirsubstance may be diminished or deteriorated naturally y time or by the use to which they are applied. Commonexamples of nonconsumable things include:

Land Houses Shares of stock nimals Furn ture Vehicles

If the things subject to usufruct are nonconsumables,t e usu ructuary as t e r g t to possess t em anto derive the utility, profits, and advantages that theymay produce, under the obligation of preserving theirsubstance. The usufructuary is bound to use thenonconsumable things as a prudent administrator andto deliver them to the naked owner at the terminationof the usufruct.

In our example on the first page of this chapter, thehome, stock and vehicles are nonconsumble things.Let’s look at each one individually:

Usufruct of Home

fter Bill dies, Mary owns an undivided one-half interestn t e ome, s e as t e usu ruct o a o t e ome,and Bill’s two children are naked owners of half thehome. While Mary is living there after Bill’s death, the




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property increases in value from $200,000 to $300,000.When Mary dies, Bill’s children own half the home, andhalf of the home is in Mary’s estate (she may also leave

her half of the home to the two children).

Usufruct of stock

fter Bill died, Mary owned 500 shares of stock herself,and she had the usufruct of 500 shares of stock. Bill’schildren were naked owners of 500 shares. If Mary neversells the usufruct shares, the children will own the 500

shares of at the termination of the usufruct. The nakedowners will benefit if the stock appreciates in value, butthey will lose out if the stock depreciates in value.

Usufruct Stock is Sold

When Bill died, Mary had the usufruct of 500 shares of

stock, and those shares were worth 30,000. Five yearslater those shares are worth 80,000 and Mary sellsthose 500 shares she has the usufruct of for $80,000.Mary just converted a nonconsumable thing (stock)into a consumable thing (cash). She now has a usufructof the cash ($80,000), she can do whatever she wants with the cash but at the termination of the usufruct(her death or remarriage) she owes the naked owners

(Bill’s children) $80,000 less any tax paid as a result of the sale.

Usufruct of Vehicles

In our example, Bill and Mary owned two vehicles each worth 15,000. Since these vehicles were commun ty

property, Mary owns half of each of these vehicles, ands e as t e usu ruct o a o eac o t ese ve c es,and Bill’s children are naked owners of half of eachvehicle.



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Mary sells one vehicle after Bill dies for $8,000, and shekeeps the other vehicle for the rest of her lifetime. When

she dies, her estate owes Bill’s children a total of 4,000a o t e procee s rom t e sa e o one ve c e , anBill’s children will own half of the vehicle that Maryowned when she died. If those two children were Mary’ssole heirs, they will own the entire vehicle because they will inherit Mary’s half.

stablishing Usufruct

Usufructs are often established when someone dies. Forexample, a married person may, in his ill, leave hissurviving spouse the usufruct of everything he owns when he dies. Or, if a married person dies without a will, the deceased’s surviving spouse will inherit theusufruct of all of the deceased’s half of the commun ty

property.

Untrue Myth: When a married person dies intestate, onehalf of their half of the community property goes to thechildren and one-half of their half goes to the spouse.

Truth: When a married person dies intestate, all of the deceased’s half of the community property goes in

naked ownership to the deceased’s children, subject tothe usufruct of the surviving spouse until the earlier tooccur of death or remarriage.

usufruct may also be established during one’s lifetime.For example, parents may donate their home to theirchildren during the parents’ lifetime by signing an Act

of Donation, but the document may reflect that theparents are reta n ng t e et me usu ruct o t e ome.




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Usufruct to Successive Usufructuaries

Some parents want a child or other loved one to be able

to live in the home after the parents die, but when thec as no more use or t e ome, t ey want t e ometo be co-owned by all of their children. So, a parent mayleave his spouse the usufruct of his half of the homein his Will, and also provide that a child will have asuccessive usufruct of the home after the survivingspouse dies. This is permitted under Louisiana law.

Usufructuary Rights

The usufructuary is entitled to the “use” and “fruits” of the thing subject to the usufruct. The following are someexamples explaining the rights of the usufructuary:

• cash dividend on stock subject to usufruct

elongs to the usufructuary e usu ructuary as t e r g t to vote s ares ostock

• The usufructuary may make improvements andalterations on property with written consent of the naked owner

• When the usufruct includes timberlands, theusufructuary is bound to manage them prudently.

Proceeds from properly managed timber operationselong to the usufructuary

Since the usufructuary is the owner of cash, they arealso the owner of any interest that the cash, CDs orsavings account produces.

Usufructuary Obligations

The usufructary may have numerous obligations, suchas the obligation to provide security, the responsibility



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to provide repairs, the payment of necessary expenses,taxes debts and other charges.

bligation of Usufructuary to Provide Security

xample: James and Florence are married. James hadtwo children from a prior marriage. James and Florencehave community property. James dies intestate (withouta Will). Florence inherits the usufruct of James’ one-half of the community property, and James’ two childrenare the naked owners of James’ half of the community

property. Since the usufructuary (Florence) is not theparent of James’ two children, those children can forceFlorence to provide security. This security will protect James’ two children in the event Florence spends,neglects or wanders off with the property over whichshe has usufruct.

Usufructuary’s Standard of Care

The usufructuary is answerable for losses resulting fromhis fraud, default or neglect. The following are commonusufructuary obligations:

The usufructuary is responsible for ordinarymaintenance and repairs

The naked owner is responsible for extraordinaryrepairs unless resulting from usufructuary faultor neglect. Extraordinary repairs are those forthe reconstruction of the whole or a substantialpart of the property subject to usufruct. All otherrepairs are ordinary.

roperty Totally Destroyed

If a hurricane or other act totally destroys property thatis subject to usufruct, neither the usufructuary nor




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the naked owner is bound to restore property totallydestroyed through accident or because of age.

Usufructuary Responsibility for Charges and Debts

The usufructuary is bound to pay property taxes on theproperty subject to usufruct.

The usufructuary may remove all improvements he hasmade, subject to the obligation of restoring the propertyto its former condition. The usufructuary may not claim

compensation from the naked owner for improvementsthat the usufructuary does not remove or that cannotbe removed.

aked Owner Rights and Obligations

In our previous example, James’ two children are naked

owners of their father’s estate, and Florence has theusu ruct o t ose assets. James c ren ave a num erof rights and obligations.

The naked owners may sell their naked ownershipinterest. Perhaps Florence wants to own the home thatshe and James owned together. She could purchase herformer step-children’s naked ownership interest.

Usually a naked ownership interest is not very marketablebecause the new naked owner’s interest will continue tobe burdened by the usufruct. The naked owner mustnot interfere with the rights of the usufructuary, and thenaked owner may not make changes or improvementson the property subject to the usufruct.



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Usufruct Termination

person’s usufruct terminates upon their death, unless

it is established for a term or subject to a condition andt at term exp res or t at con t on appens.

xample: Roy owned his home prior to marrying Alice.Roy’s home was his separate property. Roy’s Will lefthis home to his three children, subject to Alice havingthe usufruct of his home until she either died orremarried. In 2000, Alice continued living in the home

as usufructuary after Roy died. On June 1, 2004, Alicemarried again. As of June 1, 2004, Roy’s three childrenowned “full ownership” of the home. Alice would haveno more right to occupy the home.

Insurance Proceeds

When proceeds of insurance are due on account of loss,ext nct on, or estruct on o property su ect to usu ruct,the usufruct attaches to the insurance proceeds.

xample: A hurricane destroys property over whichlice has a usufruct and Bob, Carol and David are naked

owners. The insurance company pays Alice $120,000for the property damage. When the usufruct terminates,

lice owes Bob, Carol and David $40,000 each.

Usufructuary Abuses Enjoyment

xample: After Roy dies, Alice has the usufruct of hishome, and Bob, Carol and David are naked owners. Aliceneglects the home to the extent that it becomes used as

a hangout for drug dealers. What rights do Bob, Carolan Dav ave? ey may get a court to ru e t at t elice’s usufruct is terminated because Alice committed




94

waste, she neglected to make ordinary repairs, or sheabused her enjoyment in any other manner.

Settling Up With the Naked Owners

xample: After Roy died, Alice owned the lifetimeusufruct of $600,000 in bank accounts. Roy’s threechildren (who were not Alice’s children) were the nakedowners. The three naked owners knew that they wouldnot get any money until Alice died. Alice didn’t like thefact that she felt like Roy’s three children were hoping

she would die so they could get their inheritance. Alicedecided she had enough other money to live off of forthe rest of her lifetime so she renounced her usufructand allowed Roy’s children to receive their inheritance.

ther Rights Similar to sufruct

There are two other rights that are similar to usufructn Lou s ana: t e r g t o a tat on, an t e r g t ouse.

Right of Habitation

The right of habitation is the right of a person to livein the house of another. Only individuals may have a

right of habitation and the right of habitation may beestablished in houses only. The right of habitation ismore narrow than the usufruct.

Right of Use

The right of use gives a person or entity the right to

use certain things. Common examples of rights of usenc u e:

• right of passage over property



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right of light and view The right to fish or hunt The right to take fruits or products from

property.

onclusion

Remember the following regarding the Louisianausufruct:

e usu ruct s common n Lou s ana ut

uncommon or nonexistent in all of the otherstates

When you leave your spouse the usufruct of assets, you also designate who the “naked owners”are who get the assets at the termination of theusufruct

The usufructuary’s rights vary depending on

whether the usufructuary has the usufructof a consumable item (such as cash) or anonconsumable item (such as real estate orshares of stock)



Chapter 11

Living WillsMaking your wishes known about life

support machines

ou have the right to control decisions relating to yourown medical care, including the decision to have

life-sustaining procedures withheld or withdrawn innstances w ere you are agnose as av ng a term naand irreversible condition.

The Louisiana legislature has determined that theartificial prolongation of life for a person diagnosed ashaving a terminal and irreversible condition may causeloss of individual and personal dignity which secures aurdensome existence while providing nothing medically

necessary or beneficial to the person.

It’s difficult to make a decision to authorize the withdrawal of life support machines for someone youlove. The purpose of our living will laws is to allow youto tell your family and your doctors what your wishes

are regarding life support machines so that your familyoes not ave to ma e t at na ec s on. You ve ma e

your decision for them in advance by signing your living will.




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Making a Living Will

You may make, at any time, a written living will (also

know as a “declaration”) which directs the withholdingor w t rawa o e-susta n ng proce ures you avea terminal and irreversible condition.

Your written living will must be signed by you in thepresence of two witnesses. The witnesses must not berelated to you by blood or marriage, and a witness mustnot be someone who would inherit from you when you

die.

ral Living Will

n adult may make an oral or nonverbal living will inthe presence of two witnesses by any nonwritten meansof communication at any time after the diagnosis of a

terminal and irreversible condition.

Sample Living Will

The Louisiana Legislature has created a sample form fora living will. Your living will may include other specificdirections including but not limited to a designation of someone else to make your treatment decisions if you

are not capable of communicating your wishes.

DECLARATION

Declaration made this ______ day of ________, 20_ _.

I, _____________, being of sound mind, willfully andvo untar y ma e nown my es re t at my y ng s anot be artificially prolonged under the circumstancesset forth below and do hereby declare:



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If at any time I should have an incurable injury,disease or illness, or be in a continual profoundcomatose state with no reasonable chance of recovery,

certified to be a terminal and irreversible condition y two p ys c ans w o ave persona y exam ne me,one of whom shall be my attending physician, and thephysicians have determined that my death will occur whether or not life-sustaining procedures are utilizedand where the application of life-sustaining procedures would serve only to prolong artificially the dying process,I direct (initial only one)

_______ that all life-sustaining procedures,including nutrition and hydration, be withheld or withdrawn so that food and water will not be administeredinvasively,

_______ that life-sustaining procedures, except

nutrition and hydration, be withheld or withdrawn sot at oo an water can e a m n stere nvas ve y.

and that I be permitted to die naturally with onlythe administration of medication or the performance of any medical procedure deemed necessary to provide me with comfort care.

I further direct that I be permitted to die naturally with only the administration of medication or theperformance of any medical procedure deemed necessaryto provide me with comfort care.

In the absence of my ability to give directionsregarding the use of such life-sustaining procedures, it

is my intention that this declaration shall be honored y my am y an p ys c an s as t e na express on omy legal right to refuse medical or surgical treatmentand accept the consequences of such refusal.




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I understand the full import of this declarationand I am emotionally and mentally competent to makethis declaration.

_____________________ Your Name

Cit Louisiana

The declarant has been personally known to me,and I believe him or her to be of sound mind.

_____________________ WITNESS

_____________________ WI NESS

Life-Sustaining Procedure

What is a “life-sustaining procedure?” It’s defined asany medical procedure or intervention which, withinreasonable medical judgment, would serve only toprolong the dying process for a person diagnosed ashaving a terminal and irreversible condition, including

such procedures as the invasive administration of nutrition and hydration and the administration of cardiopulmonary resuscitation. A “life-sustainingprocedure” shall not include any measure deemednecessary to provide comfort care.

Revoking Your Living Will

You may revo e your v ng w at any t me y o ng anyof the following:



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Destroy ng your living will or by directing someother person to destroy your living will

Wr t ng a revocat on express ng your ntent to

revoke your living will. You must sign and datet e revocat on By making an oral or nonverbal expression of

your intent to revoke your living will. This type of revocation becomes effective upon communicationto your attending physician.

If No iving Will Exists

It is common for people who have never signed a living will to enter a terminal and irreversible condition. Whenthis occurs, the following individuals have priority tomake the decision, in the following order:

. Any person previously designated by the patient y written instrument in the presence of two

witnesses to have the authority to make the living w t e pat ent s una e.. The court appointed legal guardian of the patient

if one has been appointed. The patient’s spouse.

4. An adult child of the patient.5. The parents of the patient.. The patient’s sibling.

. The patient’s other ascendants or descendants.

Do-Not-Resuscitate Identification Bracelet

If you register your living will with the secretary of stateand pay a fee of $20.00, you will be issued a do-not-resuscitate bracelet which will include your name, date

of birth, and the phrase “DO NOT RESUSCITATE.”

Certified emergency medical technicians or certifiedfirst responders can be held criminally or civilly liable




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if they withhold life-sustaining procedures. However, if they discover that you are wearing a Do-Not-ResuscitateIdentification Bracelet, they can not be subject to liability

for withholding life-sustaining procedures.



Chapter 12

Trustsrusts can be a great tool—but don’t

believe everything you hear

T rusts are complicated to the lay person. But when used properly, they can be a valuable estate

planning tool. Some of the common uses for trustsinclude: avoiding probate, minimizing federal estatetax, protecting your children from squandering theirinheritance, provide for grandchildren’s education orother needs, protect your spouse from your children of a previous marriage, protect your children of a previousmarriage from your spouse, protecting the inheritanceof a special needs child, and much more.

What is a trust?

trust is defined as a relationship which results whensomeone transfers title to an asset to a person whose job it is to administer it for another.

xample: In George’s Will, he made a bequest of $50,000to his son, George, Jr., as trustee of a trust for the benefitof George’s grandson, George III. George provided,among other things, that the principal of the trust could




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be used for the health and education of George III, andGeorge also provided that if the assets had not beenused by the time George III reached the age of thirty,

then the trust would terminate and the remaining trustassets wou e str ute to George III. W en Georgelater died, a trust account was established and George, Jr., managed the account as trustee.

Who are the people involved in a trust?

Every trust has one or more settlors, trustees, and

beneficiaries. The Settlor is typically the person whosets up the trust. In the previous example, George isthe Settlor. The Trustee is the person who manages thetrust assets. In our previous example, George, Jr., is the Trustee. The beneficiary is the person who benefits fromthe trust. George III is the beneficiary in our previousexample.

What are the most common uses of trusts?

There are many uses for trusts in Louisiana. Thefollowing are some of the more popular uses of trusts.

Revocable Living Trust

The advantages and disadvantages of a revocable livingtrust are the most misunderstood estate planningconcepts among lay persons in Louisiana.

Maybe you are motivated to create a revocable livingtrust because you feel it necessary to “avoid probate.”Perhaps you were told that probate would take from nine

months to three years to complete costing your estate8% to 1 % o ts wort , an t at a revoca e v ng rus would avoid those delays and costs.



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Those who strongly advocate for the use of revocableliving trusts in Louisiana typically overstate the burdensof probate and ignore the burdens of the revocable living

trust.

Let’s look at a typical example of the mechanics of arevocable living trust and how it works in Louisiana.Let’s say you are married and you have three children.You purchase a book on estate planning. After readingthe book, you feel it would be in you and your family’sest interest to form a revocable living trust. Here’s what

happens next.

You work with an attorney (or worse a financial advisor who says they have an attorney on staff to draft thedocuments) to prepare your revocable living trust. Acomplete revocable living trust estate plan will alsoinclude a last will and testament for you and your

spouse, a durable power of attorney, a health care powero attorney, an a v ng w . Once a t ese ocumentsare prepared you sign them.

Next, you must fund the trust. You will avoid probateonly if every asset you have has been transferred to your trust before your death. Documents are preparedand signed whereby you and your spouse transfer title

to your home, other real estate, bank accounts, stock,rokerage accounts, vehicles, boats and trailers to your

trust. These real estate transfers must be recorded inthe public records of the parish where the property islocated. Louisiana law also provides that if the trustowns real estate, the entire trust or a summary extractmust be recorded in the public records of the parish

where the property is located (eliminating privacy for your trust .




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When one spouse dies, that spouse’s share of the trustbecomes irrevocable and the surviving spouse, as trustee,must give to the deceased’s spouse’s beneficiaries

(most likely his children), at least annually, a clear andaccurate account cover ng t e trustee s a m n strat onfor the preceding year. Also, any time a beneficiaryrequests information, the surviving spouse will have togive the beneficiary complete and accurate informationas to the nature and amount of trust property, andpermit the beneficiary to inspect the trust accounts andtrust documents. There will likely be limitations on the

surviving spouse’s power to use the trust assets.

When the surviving spouse dies, the successor trustee(likely your adult child) will be responsible for terminatingthe trust, providing accountings to all the beneficiaries,and distributing trust assets to the beneficiaries. If thesurviving spouse, at the time of his or her death, owns

anything in his or her name, such as a bank account,ve c e, s ares o stoc , or p ece o rea estate, asuccession will be necessary to transfer the asset out of the decedent’s name to the trust pursuant to the “pour-over Will.”

Most, if not all, of these actions required of you, yourspouse, or your successor trustee, will likely require

that the trustee retain attorneys and accountants tofulfill your obligations. Filing fees will be paid to theclerk of court each time a real estate transfer or extractis recorded.

The following are important but rarely discussedpoints about revocable living trusts in Louisiana:

1 Revoca e v ng trusts on t avo taxes.enerally, assets in a revocable living trust are



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subject to the same taxes as assets left in yourname;

2) If you own any asset in your own name when you

die, a succession/probate is required;3 It can e a ass e or you to own a o your assetsin a trust for the rest of your lifetime. Third partiesare often confused when your bank accounts,vehicles, and other assets are titled in the nameof your trust;

4) The succession/probate procedure in the State of Louisiana is much simpler than the procedures

in other states.5) A revocable living trust requires two transfers of

your assets—one when you fund the trust andone when your trust is terminated after you die.If the transfers involve real estate, they will berecorded in the public records of the parish wherethe property is located. A succession only involves

one transfer.6 Revoca e v ng trusts are o ten prepare y non-attorneys (or are often sold by financial planners who are motivated to sell you financial products),and thus may not properly reflect your estateplanning wishes.

There are circumstances where revocable living

rusts can be helpful. These include:

1) You live in Louisiana but you own real estate inother states. A revocable living trust will avoid theancillary probate in those other states whereby you own real estate;

2) You want someone else to manage your assets for

you. You can establish your revocable living trustan name someone e se as your trustee suc asa trusted friend, advisor, relative, or a corporatetrustee) so that they can handle your investments,




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ank accounts, and also handle purchases andsales of assets on your behalf.

While the determination of whether you should havea W - ase estate p an or a trust- ase estate p andepends on your circumstances and objectives, itis inappropriate to state that the average person willalways benefit by using the revocable living trust as hisor her primary estate planning tool.

ther Uses For Trusts

Trusts for Minors

If you have minor children, or if you plan on leavinga bequest to your young grandchildren, you shouldconsider a trust.

In Louisiana, if a minor (a child under the age of 18 n er ts n s or er own name, t en a court-supervised tutorship proceeding is necessary. The court will appoint a tutor to oversee the minor’s inheritance,and any payments to or on behalf of the minor must beapproved in advance by the court. This is an expensiveand cumbersome proceeding.

If you have minor children, you should designate in your Will that any inheritance your children receive willbe placed in trust so that the trustee that you namecan manage the assets and use it for the right reasons without having to get the courts involved.

If you would like to leave a bequest to your grandchildren,

you should do the same, particularly if your grandchildrenare young an una e to manage an n er tance orthemselves.



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xample: Grandma and Grandpa want to leave $50,000to each of their five grandchildren (who currently rangein age from 15 down to 2). If the grandchildren inherit

this money while they are minors, a tutorship proceeding w e requ re n w c t e court w appo nt a u or ooversee the funds. If the money needs to be used priorto the grandchild’s 18th birthday, a judge must approvethe expenditure. At the grandchild’s 18 h birthday, thetutor must turn the funds over to the grandchild.

better alternative is to provide in the last will and

testament of Grandma and Grandpa that these fundsfor the grandchildren will be placed in trust afterthe death of Grandma and Grandpa. Perhaps eachgrandchild’s parents could be the trustees of the trust,and Grandma and Grandpa would authorize the trusteesto use the funds for the grandchild’s health, educationand welfare. Perhaps Grandma and Grandpa could also

provide that whatever funds remained in the trust whent e gran c reac e t e age o 2 or some ot er age when it is more likely that the grandchild would havematured) would be turned over to the grandchild.

Trusts to avoid estate taxes

The federal estate tax exemption has increased in recent

years from $600,000 to $2,000,000. Only about 1% of families are subject to the federal estate tax. However,for those families that are subject to this tax, it can bedevastating.

Many individuals and couples who are facing a federalestate tax at their deaths transfer assets to an irrevocable

trust during their lifetime to remove those assets fromtheir estate. Each person can transfer 12,000 each year either to an individual or to a trust for the benefitof that individual.




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xample: Mom and Dad have a combined estateof $6,000,000. Even with a properly drafted will orrevocable living trust, there will be an estate tax bill due

to the IRS of about 1,000,000 after the death of thesurv v ng spouse. ey ave t ree c ren an sevengrandchildren. Since both Mom and Dad can transfer$12,000 to an unlimited number of people each yeartax free, they decide to create an irrevocable trust forthe benefit of their children and grandchildren, andthey transfer assets valued at $240,000 each year tothe trust. They name their trusting son as the trustee

of the trust. It will be his job to manage the trust assetsuntil Mom and Dad die, and then distribute the trustassets in accordance with the instructions given him bythe trust nstrument.

Special Needs Trusts

Individuals with certain disabilities can receive cashene ts an me ca coverage rom var ous governmentprograms. In order to qualify for these benefits, theindividual’s income and resources must not exceedcertain levels.

If a parent leaves a bequest to a special needs child, theinherited assets may preclude the child from receiving

the benefits. The government, however, has establishedrules to allow assets to be held in trust for the benefitof a special needs child, preserving the governmentbenefits, as long as certain parameters are met.

These trusts, called Special Needs Trusts, preservegovernment benefit eligibility and leave assets that

will meet certain needs of a special needs individual.Spec a Nee s rusts are typ ca y es gne so t at t etrust assets can be used to supplement, not supplant,government benefits. Trust assets are typically



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distributed to third parties to pay for items other thanthe food and shelter of the disabled individual.

Trusts for Married Couples

Trusts are commonly used by married couples. Manymarried couples would like for the surviving spouse toenefit from the assets accumulated during the lifetime

of the couple, but married people don’t like the idea of all of their assets going to the surviving spouse’s “new”spouse.

xample: Ted and Angela have $1,000,000 in assets. These assets are community property because they were accumulated during their marriage. Ted has twochildren from a prior marriage. Angela has one childfrom her prior marriage. Ted wants Angela to have accessto their estate if he dies first, but he fears that it will all

e left to Angela’s “new” husband if Angela marries aftere s eat . Or, Ange a oes not remarry, s e m g tleave the entire estate to her one child when she dies— to the exclusion of Ted’s children. So, Ted establishes atrust (this trust can be in his will or it can be a standalone trust) so that Ted’s half of the community propertygoes to the trust when Ted dies. Angela will be able touse the trust property after Ted dies for her health,

education, maintenance and support. When Angeladies, the remaining trust assets will revert back to Ted’schildren.

This arrangement of providing for the needs of yourspouse while also providing for a future bequest to your children can also be accomplished without a trust

y leaving the usufruct of assets to your spouse andnam ng your c ren as t e na e owners. You on tread about the “usufruct and naked ownership” planningtool in national publications because Louisiana is the



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Revocable living trusts. Not as popular in Louisianaas in other states because RLTs are commonly usedfor probate avoidance, and probate is simpler in

Louisiana than in most other states. An RLT canst e ene c a you own rea estate n ot erstates or if you want someone else to manage yourassets for you.

Trusts for minors. If there’s a chance your minorchild or minor grandchild will inherit assets from you, then you need to make sure those assets will be placed in trust so the courts won’t need

to supervise the minor’s assets and so that theminor will be protected from squandering theassets when he or she reaches the age of 18.

Trusts to avoid estate tax. Not as popular nowsince the estate tax exemption has increasedfrom $600,000 to $2,000,000, but if estate taxesare likely, you need to consider these irrevocable

trusts. Spec a Nee s rust. I you ave a c w tspecial needs, make sure any inheritance youleave that child is placed in a Special Needs Trust. This will help preserve government benefits that

enefit the child. Trusts for Married Couples. A way to make your

assets available for your spouse after you die,

ut when your spouse later dies, the trust assets will revert back to your heirs, not your spouse’sheirs.

Charitable Trust. A vehicle which allows you totransfer appreciated assets to a charity, havethem sold with no tax consequences, receive anincome off those assets for your lifetime, and at

your death the remaining trust assets are passeda ong to your avor te c ar ty or c ar t es.




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Title XIX of the Social Security Act, enacted by the SocialSecurity Amendments of 1965, provided for grants tostates to implement the Medicaid Program. Medicaid is a

federal-state entitlement program that pays for medicalserv ces on e a o ow- ncome e g e persons.Medicaid is financed from federal and state funds.

The Louisiana Department of Heath and Hospitals (DHH)is the single state agency under the Louisiana State Planfor administration of medical benefits. The LouisianaDepartment of Health and Hospitals has a Medical Care

dvisory Committee (MCAC), which is mandated by Title XIX regulations. The MCAC consists of 25 personsand includes state legislators, physicians and otherrepresentatives of the health professions, members of consumer groups, including the Title XIX recipientsand consumer organizations, and the Secretary of theDepartment of Health and Hospitals or his designee.

The Louisiana Medicaid Eligibility Manual can beocate on ne at www. . ou s ana.gov pu cat ons.asp?ID=1&Detail=461

The vast majority of Medicaid spending for long-term careis on nursing homes. However, Medicaid is available topeople who need the type of medical care available in anursing home setting but who can be treated effectively

at home or in the community without being placed ina nursing home. However, Medicaid’s resources arelimited and there are long waiting lists to receive theseHome and Community Based Waiver services.

Medicaid is Not Medicare!

Even though the names sound similar, the programsare very erent. Me care s t e ea t nsurance t atmost people age 65 and older have in the United States.Medicare is designed to cover the expenses that health



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insurance typically covers, such as doctor’s visits,hospital stays, surgery, and lab tests.

How Does a Single Person (Unmarried) Becomeligible for Medicaid?

To be eligible for Medicaid, you must pass an income testand an asset test. Let’s look first at the income test.

In 2007, an unmarried Louisiana Medicaid applicantcan have no more than $1,869 of income per month

and qualify for Medicaid. In general, if your monthlyincome is less than $1,869, you will have to use mostof this income towards your care and Medicaid will paythe difference between your income and the cost of thecare.

Personal Needs Allowance. The amount of money from

your income that you are allowed to keep each months ca e t e persona nee s a owance. Lou s ana spersonal needs allowance is currently $38. All of yourother income, with a few exceptions such as healthinsurance premiums, must be paid to the nursinghome. The nursing home then bills Louisiana’s Medicaidprogram for the shortfall.

sset test. A single applicant can have no more than

$2,000 of “countable” assets. Countable assets includecash, bank accounts, certificates of deposit, IRAs, 401(k)accounts, stocks, bonds, lump sum annuities, cashvalue in life insurance policies, real estate that is not your home, business interests, and other assets thatcan be converted to cash. Interests in a success on arecountable even if the succession has not been opened or

the inheritance is refused. Usufructs are also countable.ny asset n your revoca e v ng trust s counta e.




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What assets don’t count for Medicaid?

Countable assets, like the ones described above, are

assets that count in terms of qualifying for Medicaid.Noncounta e assets, a so nown as exc u a e orexempt assets, do not count. Owning noncountableassets will not affect your Medicaid eligibility.

By far the biggest noncountable asset that most of youown is your home property. In Louisiana, the homeproperty is property in which you have an ownership

interest and that serves as your primary residence. Itincludes the house or lot which is the usual residence,all contiguous property, and any other buildings on thehome property. Property is contiguous to the residenceif it is touching the residential property (even cornerto corner) and is not separated by property owned byothers. Property separated by a public right of way,

such as a road, is considered contiguous.

Do not rely on Homestead Exemption status fordetermining home property for Medicaid eligibilitypurposes.

Your home property will be excluded of you are living in your home, or if you are away from your home because

of a medical condition, and you are keeping your homeavailable, and you intend to use it as your home when your condition permits. Your home property is alsoexcluded when you are away from your home and yourspouse and/or dependant relative lives there.

Your home property is no longer excludable if offered for

sale based on your lack of intent to return. A nursingac ty res ent genera y cannot esta s a new omeproperty while residing in a facility since you would have



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never lived there and the new residence would not meetthe definition of home property.

The value of your home property that is in another stateouts e o Lou s ana s genera y a counta e asset.

Household goods and personal effects. You can excludethe following items, regardless of value: one weddingring and one engagement ring per individual, along withprosthetic devices, wheelchairs, hospital beds, dialysismachines and other items required by a person’s

physical condition if they are not used extensively andprimarily by the other members of your household.

general exclusion of up to $2,000 applies to the totalequity value of household goods and personal effectsother than those excluded regardless of value.

Vehicles. One vehicle per household is excluded,regar ess o ts va ue, anyone n t e Me ca app cant shousehold uses it for transportation. Medicaid assumesthat your vehicle is used for transportation unless thereis evidence to the contrary. This exclusion even appliesto temporarily inoperable vehicles which are expected toe repaired and used for transportation within the next

twelve months.

If you own more than one vehicle, the exclusion appliesto the car with the greater equity value, regardless of which car is actually used. The equity value of all othervehicles, including inoperable vehicles and antique carsis counted. Medicaid uses the NADA “Blue Book” trade-in value at www.nadaguides.com.

Burial Contracts, Burial Funds, and Burial Spaces. Aurial contract is countable if it is revocable or salable,

and conditions for its liquidation do not present a




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significant hardship. However, any portion of theburial contract that clearly represents the purchase of burial space may be excludable, and some or all of the

remaining value may be excludable as burial funds. Aur a contract s not counta e t cannot e revo eand cannot be sold without significant hardship

Burial Funds. Funds set aside for the burial expensesof the Medicaid applicant and his/her spouse may beexcluded if those funds are clearly designated for youror your spouse’s burial expenses. A maximum exclusion

of up to $10,000 each in funds set aside is allowed for you and also your spouse. This amount is reduced bythe face value of your burial insurance which has nocash value.

Burial Spaces. A fully paid burial space or agreement which represents the purchase of a burial space held

for your burial, your spouse’s burial, or the burial of mme ate am y s exc u e regar ess o va ue.

What are the rules if you are married?

If you are married and on Medicaid, some of your incomecan be paid to support your spouse.

The income and asset tests are significantly different if one spouse is in the nursing home (the “institutionalizedspouse”) and the other spouse stays at home or in thecommunity (the “community spouse”).

One rule that is rarely understood is that the income of the community spouse is not considered in determining

eligibility for an institutionalized spouse.

xample: Mary Smith is applying for Medicaid. Herhusband receives $4,000 of monthly pension and social



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security income. Mary receives $600 of monthly socialsecurity income. Bill’s $4,000 of monthly income is notconsidered in determining Mary’s Medicaid eligibility.

Owners p o ncome or eac spouse s eterm ne without regard to Louisiana community property laws.

spouse has full ownership of income paid to hisname. A spouse has half ownership of income paid inthe names of both spouses. And a spouse has pro rataownership of income paid in the names of either one oroth spouses and another individual.

The amount of the institutionalized spouse’s incomethat a community spouse can keep to live on is calledthe Maintenance Needs Allowance. Here’s how it’scalculated. Let’s say Bill has $1,800 of monthly incomeand his wife Mary has $1,000 of monthly income. Bill isin the nursing home and Mary wants to know if she can

keep any of Bill’s income.

We start by determining Mary’s income ($1,000) and we deduct this from the Spouse’s Maintenance Needs

llowance ($2,541.00 for the year 2007) to determinehow much of Bill’s income that Mary can keep. Ingeneral, Mary can keep $1,541 of Bill’s monthly income,and the remaining $259 ($1,800 minus $1,541) is paid

to the nursing home each month. Assuming they meetthe asset test, Medicaid will pay Bill’s monthly nursinghome cost that exceeds $259.

What’s the Asset Rule if You are Married

If you are single, in order for you to qualify for Medicaid

you must have no more than 2,000 of countableasse s.




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The asset rules are very different for married couples when one spouse is in the nursing home (institutionalizedspouse) and one spouse is at home (community

spouse .

In Louisiana, a married couple can have as muchas $101,640 (for 2007) in countable assets and theinstitutionalized spouse can qualify for Medicaid. This amount is called the Spousal Impoverishment-Maintenance Needs and Resource Standards. It’sdefined as the maximum amount of the couple’s

combined countable resources that may be allocated tothe community spouse.

married couple’s countable assets are definedas including the community spouse’s assets, theinstitutionalized spouse’s assets, and the couple’sshared assets.

xample: In a t on to t e r ome an car, B anMary Smith have countable assets totaling $125,000.Bill is in the nursing home. We know he can keep$2,000. Mary can keep $101,640. Bill will not qualifyfor Medicaid at this time because they have $21,360“too much” in countable assets.

However, in general, if when Bill applied for Medicaid,he and Mary had countable assets totaling $90,000 (andthey had made no recent uncompensated transfers), he would qualify for Medicaid. Their total countable assets were less than $101,640. However, the assets that areallocated to the institutionalized spouse that are inexcess of 2,000 must be transferred to the community

spouse in order for Bill to remain eligible.



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state Recovery—Medicaid Can Take Your HomeAfter You Die

The federal government has required the State of Lou s ana an a ot er states to esta s an estaterecovery program. As a result, The Department of Health and Hospitals has established an estate recoveryprogram for the purpose of recovering payments madeto nursing homes on behalf of Medicaid recipients.

t the time that a Louisiana resident applies for

Medicaid, the applicant will be informed that federallaw and regulations mandate estate recovery action bythe state and that payments made by Medicaid may besubject to estate recovery.

Recovery can be made only after the death of the patientand his or her spouse. After the patient dies, Medicaid

will serve a notice on the family or heirs of Medicaid’sact on.

xample: Bill Smith is in the nursing home and onMedicaid. His wife Mary lives in their home. Bill waseligible for Medicaid because their home was an exemptasset (for purposes of Medicaid eligibility) and theircountable assets were less than $101,640. During

Bill’s stay in the nursing home, he spent $150,000 of Medicaid’s funds. After both Bill and Mary die, Medicaidcan force the home to be sold to be reimbursed for theMedicaid funds they spent for Bill.

enalties for Transfers

Mary Jones would qualify for Medicaid except that shehas a bank account with 61,000. Mary decides to giveher daughter, Jane, a gift of $60,000. In the month after




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the gift, Mary has only $1,000. Does Mary now qualifyfor Medicaid? Not a chance.

When you apply for Medicaid, the application asks youto st any trans ers or g ts t at you ave ma e to anindividual in the last three years (or 36 months).

If a transfer is discovered during this 36 month look-backperiod, then the applicant is disqualified for Medicaiduntil the penalty period expires. The penalty period isdetermined by dividing the value of the transfer by the

verage Monthly Cost to Private Patients of NursingFacility Services. For 2007, Louisiana has determinedthat the average cost of a nursing home stay is $3,000.So, if Mary made a transfer of $60,000, she would beineligible for Medicaid for 20 months ($60,000 transferdivided by $3,000 average nursing home cost).

By now, you probably realize that Louisiana’s Medicaidru es are comp ex. So et s ta e a oo at some o t eplanning opportunities that are available.

ualifying for Medicaid

Every Medicaid applicant’s situation is unique. Whatmay work for one person may not work for another. In

developing a Medicaid plan, it’s critical that you work with someone knowledgable in this complex area. Thefollowing are a few of the techniques often employed inassisting people in qualifying for Medicaid.

The reason that most people fail to qualify for Medicaidis that they have too many countable assets. Most of the

Medicaid Planning involves timely transfers of countableasse s.



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wning Exempt Assets

Your house and your car are not countable. Certain

urial contracts, burial funds and burial spaces area so not counta e. By s mp y trans err ng counta eassets (such as cash) into noncountable assets, you canqualify for Medicaid.

xample: Bill and Mary Smith have a home valuedat $150,000. There is $35,000 left on their mortgage. They drive an old car worth $2,000, and they’ve made

no funeral arrangements. They have CDs at the banktotaling $90,000, and their checking and savingsaccounts total $70,000. Mary is entering the nursinghome while Bill will stay at home. Mary presently doesn’tqualify for Medicaid because their countable assetsexceed $101,640. Their countable assets actually total160,000. But if they use 35,000 of their cash to pay off

their mortgage, purchase a better car for 20,000, anduse 12,000 to prepay their funerals, their countableassets will be reduced to $93,000 and Bill will qualifyfor Medicaid.

Making Gifts

Making gifts to qualify for Medicaid is one of the most

misunderstood aspects of Medicaid Planning. Manypeople think that if a person makes a gift, they wille disqualified from being eligible from Medicaid for a

period of three years. The truth is that three years istypically the maximum penalty period, but a personmay be eligible for Medicaid in less than three years.

Remember that when you make a gift, the value of the gift is divided by 3,000 to determine the penaltyperiod. This rule can be used to your advantage. Here’san xample: Mary is entering the nursing home. Her




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nursing home, medicines and other monthly expensestotal $3,500 per month. She has $1,000 of monthlyincome. She has 87,000 in the bank. One plan may be

to spend 8,000 on her funeral, continue to pay for hercare, and to give away 3,000 each month until she isdown to $2,000 of assets. Each $3,000 transfer makesMary ineligible for one month. Using these figures, she would qualify for Medicaid in about 14 months, $42,000 would be saved and her $8,000 funeral would be paidfor.

Had she simply donated the entire $87,000 at once, she would have been ineligible for Medicaid for 29 months($87,000 divided by the $3,000 Louisiana divisor).

Don’t try any of these Medicaid planning techniques without first working with someone who is bothknowledgable in Louisiana Medicaid law, and is also

experienced in utilizing Medicaid planning strategies.

Who Should You Give Your Assets To?

Good question. Your options include your children, atrust, or a combination of the two.

Most families who engage in Medicaid Planning agree

up front that the money that is taken out of the parents’ names will be “set aside” in an account or accounts forthe children. Children informally agree that they willnot touch the money until after their parents die, andthe children even informally agree that they will spendthe money on the parents if necessary.

Unfortunately, things don’t always work out as planned.Many t mes w en parents g ve money to t e r c ren,the children end up spending it. Children have manyreasons to spend it: they need it for a new truck or



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oat; they need to pay off credit card debt; they wanta new home; they feel they deserve a vacation; theyare influenced by their spouse; or, it’s just too easy to

spend it. The children could also lose the money bygett ng vorce , gett ng sue , or ow ng t e IRS or ot ercreditors. The children might also die before the parentsand then the family is stuck trying to retrieve the moneyfrom the child’s heirs.

Trusts and Medicaid Planning.

What is a trust? A trust, as defined by the Louisiana TrustCode, is the relationship resulting from the transfer of title to property to a person to be administered by himas a fiduciary for the benefit of another.

For example, let’s say John Boudreaux has four children. John wants to give his children a gift of 100,000, but he

doesn’t want them to spend it right away. John knowsthat if he gives 25,000 to each of his four children,at least three of them will spend it within a week ortwo. John feels that his daughter, Jenny, is responsiblethough and will act in accordance with John’s wishes.So, John establishes the Boudreaux Family Irrevocable Trust and names Jenny as the trustee of the trust. John would like to continue getting the interest from

the $100,000 so he names himself as the incomeeneficiary of the trust. John would like the principal

(the $100,000) to be distributed to his children after John’s death. Jenny goes to the bank and sets up theBoudreaux Family Irrevocable Trust bank account. Only Jenny has signature authority over this account becauseshe is the sole trustee. John then transfers 100,000

of his money to this trust account. Jenny thereafter,n er capac ty as trustee, manages t s money or t erest of John’s lifetime, seeing to it that John continuesto receive the interest as the income beneficiary of the




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trust, and Jenny distributes the principal to the fourchildren (the principal beneficiaries) after John’s death.Be aware, however, that this is a simplistic example,

and every transfer of assets will have Medicaid eligibilityconsequences, ncome tax consequences, g t an es a etax consequences, community property consequences,and more. Don’t do this without an expert.

Trusts are a popular tool in Medicaid Planning because,if established correctly, trusts can permit individualsand married couples to transfer assets out of their

name, but retain control of the assets after they aretransferred.

Many parents don’t want to put their assets in theirchildren’s names because bad things can happen afterthe assets are transferred. Children might spend theassets, they might be influenced adversely by their

spouses, children might get divorced and lose the assets,c ren may ave cre tor pro ems or pro ems w tthe IRS, children might get sued.

Deficit Reduction Act of 2005

New laws were passed by Congress and signed by thePresident on February 8, 2006. At the time this book

was written, Louisiana (and many other states) hasnot adopted these new Medicaid eligibility provisions.It is anticipated, however, that all states will adopt theprovisions of this Act. The two most discussed provisionsof the new law, in general, do the following:

• It extends the look-back period to five years for

all transfers. Currently the look-back period fortrans ers to n v ua s s on y t ree years• Current law provides that the penalty period for

transfers begins when the transfer is made. Under



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the new law, the penalty period doesn’t start untilthe Medicaid applicant is in the nursing homeand depletes his assets to the qualifying levels

ese c anges to Me ca e g ty aw, w en a opte y Louisiana, are designed to make it more difficult toqualify for Medicaid. Don’t take any Medicaid planningactions without first getting advice from someone whohas a thorough understanding of past and presentLouisiana Medicaid laws.

onclusion

The cost of long term care is increasing in Louisiana.While few people desire to live in a nursing home, evenfewer desire to deplete their entire life savings while livingin a nursing home. Be aware of the following regardingLou s ana Medicaid:

Most o t e peop e n Lou s ana ave a or aportion of their cost paid for by Medicaid. Theothers are private pay residents pay the entirecost themselves at the rate of thousands eachmonth

• Even though the terms sound alike, Medicaid isa completely different program from Medicare.

• You must pass stringent tests before qualifyingfor Medicaid.

• n unmarried individual, in general, to qualifyfor Medicaid must own not more than a house, avehicle, and an additional $2,000.

• Married couples, when one spouse is in thenursing home and one spouse stays in the

residence, can own no more than their house,a vehicle, and other assets totaling 101,640 invalue




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• While your home is exempt for purposes of qualifying for Medicaid, the estate recoveryprogram allows the state to recover the Medicaid

costs after death from the value of your home Many Me ca p ann ng strateg es ex st ust asmany tax planning strategies exist). Don’t takeany action without first talking to a Medicaid lawexpert.



Chapter 14

Successions and ProbateHandling legal matters when a loved

ne dies

When a loved one dies, there are many things, bothlegal and personal, that need to be handled. It’s

a difficult time for many families. An important legalmatter that must occur whenever someone dies owningassets in their name is a succession.

What is a succession?

succession is the process of transferring assets fromthe name of the person who died into the names of theappropriate heirs. Other states often call this process“probate,” but in Louisiana, it is called a “succession.”

The succession typically involves the family gatheringinformation on what the decedent owned and bringingit to an attorney. The attorney then prepares numeroussuccession documents, including a detailed list of all

of the decedent’s assets and liabilities, as well as a Judgment of Possession, which a judge signs orderingthe transfer of assets out of the decedent’s name andinto the names of the heirs.




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The attorney then files these documents at thelocal courthouse requesting that the Judge sign theappropriate Orders. Once the judge signs the Judgment

of Possession, assets can be transferred.

Information to Gather

The succession process typically begins with the familygathering the necessary information on the decedent’sassets that he or she owned at the date of his or herdeath. The information typically gathered includes

copies of the following:

• Statements from banks and other financialinstitutions showing account balances andinvestments at or near the date of death;

• The Act of Sale of the residence and otherLouisiana real estate showing the legal description

of property owned by the decedent; Stoc cert cates t e ece ent owne stoc ncertificate form;

• The last will and testament (if one exists) of thedecedent;

• Vehicle, boat and trailer titles owned by thedecedent;

• Promissory Notes or Mortgages owned by the

decedent;• Mortgages the decedent owed;• Funeral expenses; and• Documentation showing other assets and debts

that existed at the date of death.

Assets Not Included in the Succession

Certa n assets you own are common y re erre to as“nonprobate” assets. These typically are assets thatgo directly to a previously designated beneficiary upon



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the decedent’s death. While these assets are typicallynot listed in the succession (unless the estate is thedesignated beneficiary), the attorney needs to be aware

of these assets because they are included in the estateor e era estate tax purposes or t ey may ave orceheirship consequences. Common nonprobate assetsinclude:

Individual Retirement Accounts (IRAs) 401(k) accounts Life insurance Keogh accounts 403(b) accounts nnuities U.S. Savings Bonds titled in the name of the

decedent “or” someone else ssets titled in the name of a trust

Once the attorney has all of the relevant success onn ormat on, e can a v se t e am y w et er an“administration” is necessary. An administration occurs when the attorney prepares documents and presentsthem to the court so that an executor can be confirmedor an administrator can be appointed.

n administration is necessary when certain matters

need to be tended to before the succession is completed.Common situations that require an administrationinclude:

succession asset such as a house or other realestate, a vehicle, stock or any other asset needsto be sold prior to completion of the success on

The executor or other third party needs access tot e ece ent s accounts to pay success on e tsprior to the completion of the succession

Someone contests a succession matter




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If an administration is necessary, the court will signan Order confirming that the person named in the Willshall serve as the executor, or the Judge will sign an

Order appointing an administrator of the succession if no ast w an testament ex ste . e c er o court will then issue “letters testamentary” (if an executor was named in the will), or “letters of administration” (if no ill exists and the judge appoints an administrator. This documents put third parties on notice that anexecutor has been confirmed, or an administrator hasbeen appointed.

Independent Administration

Recently the Louisiana Legislature authorized what’sknown as “independent administration.” The traditionaladministration is often cumbersome, time-consuming,and expensive. For example, if an executor needed to take

some action on behalf of the succession, such as pay asuccess on e t suc as a ut ty or t e ome , sea succession vehicle, or even sell the decedent’s home,the executor would have to petition a court for approvalto pay the debt, sell the asset, or whatever other actionneeded to be taken by the executor. The judge wouldhave to approve each of these actions in a written courtorder.

Now, if the executor is approved as an “independentexecutor,” he or she can take the necessary actions toadminister the succession, such as pay succession debtsand sell succession assets without having to obtain a judge’s approval each time to do that.

How does an executor become an independent executor?ere are two ways. F rst, t e ece ent cou aveappointed the executor in his will as an independentexecutor. Second, if no such designation exists, then all



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of the heirs can agree (in writing) to permit the executor(or the administrator if no will exists) to serve as anindependent executor or an independent administrator.

Hav ng an independent xecutor can make settling theestate muc eas er or a part es nvo ve .

Most successions are concluded without anadministration. Even though the decedent signed a Willand designated an executor, it may be unnecessaryto go through the time and expense of having thatperson confirmed as the executor. When the succession

is relatively free of debt and uncomplicated, theadministration can be avoided. The successiondocuments are prepared and signed, and assets aretransferred to the heirs without getting an executorconfirmed or an administrator appointed.

The attorney will then prepare all of the success on

documents. Many of these documents are calledp ea ngs. e p ea ngs w e e at t e court ousein the parish where the decedent lived (was domiciled) atthe date of his death. The succession pleadings typicallyinclude:

ffidavits of Death, Domicile and Heirship. Thismust be signed by two people familiar with the

family circumstances. This is proof to the courtof the decedent’s death and the decedent’s familyrelationships.

Detailed Descriptive List. This is a detailed listof all of the succession assets and debts of thedecedent as of the date of death of the decedent.

Petition for Possession. This is a success on

pleading prepared by the attorney which lays outt e re evant acts o t e success on an requeststhat the Judge sign the Judgment of Possession.




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• Petition for Probate of Testament (used when thedecedent had signed a last will and testament). This is a document filed with the signed last will

and testament of the decedent requesting that the Ju ge s gn an Or er stat ng t at t e w s a va will and that it be followed.

• Judgment of Possession. This is often the mostimportant document the Judge signs. Thisdocument, when signed by the Judge, ordersthird parties, such as banks, other financialinstitutions, transfer agents of corporations, the

Department of Motor Vehicles, parish real estateoffices, and others, to transfer assets that wereformerly in the name of the decedent into thenames of the appropriate heirs.

The heirs that the attorney represents will typically beasked to sign a document called a Verification in which

the heirs “verify” that the information in the Petition forPossess on s correct.

Transferring Assets to Heirs

fter all the legal documents have been prepared, filedat the courthouse and signed, it will be time to actuallytransfer the assets to the heirs.

Transferring Real Estate

In Louisiana, there are no deeds for real estate. If thedecedent owned real estate, a certified copy of the Judgment of Possession will be filed in the ConveyanceRecords of the parish where the property is located. This

filing transfers title of the property to the heirs.




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Does a Succession Take a Long Time?

It is reported in many national publications that probate

takes many years to conclude. Many of these publicationsare a so a vocat ng t e use o some pro ate avo ancetool.

In Louisiana, our probate/succession laws are simplerthan the laws of many other states. Successions withabsolutely no complications can take about two monthsto complete. An expedited timeline follows:

• January 1—date of death• January 15—meet with attorney• January 25—supply all information requested to

attorney• February 15—family meets with attorney to sign

necessary documents

February 20—documents filed at courthouse Fe ruary 28— u ge s gns Ju gment oPossession

• March 1-30—assets transferred to heirs

Succession Delays

Many things can cause a delay in the completion in the

succession. Typical reasons for delay include:

• The family or the attorney have difficulties indetermining all of the assets and liabilities of thesuccess on

• personal representative (executor oradministrator) needs to be confirmed or appointed

to handle matters during the success on Someone contests t e success on or sagrees

how the succession is being handled (this could



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cause completion of a succession to be delayedfor years)

Either the attorney, an heir or the family members

in charge procrastinate e era estate tax return must e e . srequires that certain succession assets beappraised and often requires that assets be soldto pay the tax. The federal estate tax return isdue nine months after the death of the decedentand often the succession is not concluded untilfederal estate tax matters are concluded.

Succession Costs

Succession costs can vary from success on tosuccession, and from attorney to attorney. Attorneyfees and court filing fees are a part of every success on.Some successions incur accounting fees, appraisal fees,

Lou s ana Inheritance Tax. Federal estate tax, Lou s anaEstate rans er ax, an ot er costs

Some successions only include a house, a vehicleand perhaps a bank account or two. If all heirs are inagreement and the information on the deceased’s assetsis organized, it should be less expensive than othersuccessions.

Other successions are much more expensive. Whenheirs choose to fight their differences out in court, thecosts can be staggering.

Court filing fees rarely exceed $1,000. Attorney fees willvary from attorney to attorney. Unlike some other states,

Louisiana has no statutory fee schedule. Louisianaattorneys are requ re to c arge a reasona e ee.Common examples of fee structures include:



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Your trust will own your home, bank accounts, vehicles,and all other succession assets. When you die, you ownnothing and your trust owns everything. The success on

process only governs the assets titled in your name.However, you ave a revoca e v ng trust an you vetransferred everything you own to it, you may incur thefollowing difficulties:

You’ll buy and sell your vehicles in the name of your trust. This confuses all parties involved

Your checking account will be titled in the name

of your trust. Again this confuses many thirdparties

You have to make sure that you never ownanything in your name during the rest of yourlifetime

When you die, a trust accounting and a trustadministration will likely be required when

distributing trust assets to your beneficiaries. Thistrust a m n strat on can e more comp catethan the succession process.

While every family’s circumstances are different, it’seasier for many individuals and married couples tocontinue owning their assets in their own name, and toorganize and arrange their affairs so the succession will

e efficiently handled by an independent administrator. This process is easier than creating a revocable livingtrust and transferring all of the assets to the trust followed y the necessary trust administration at death.

Ignoring the Succession

xample: Bill and Mary have been married for 40 years. B e . Mary cont nue to ve n t e omeand drive the vehicles. She was the beneficiary of Bill’slife insurance, and she had access to all of their bank




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accounts because the bank accounts were in their jointnames. Four years go by after Bill’s death. Mary neverhad the succession done because she was told by her

neighbor “she didn’t need to do it.”

Mary received bad advice from her neighbor. There area number of reasons Mary should have seen a lawyer tocomplete the succession, including:

• Mary will not be able to sell the home or vehiclesbecause they are titled in the names of both Bill

and Mary, and those assets can’t be sold untilBill’s name is removed from the title.

• For deaths occurring after June 30, 2004,Lou s ana Inheritance Tax is due if the success onis not underway within nine months after thedeath of the decedent. This tax is completelyavoided if you complete the succession within

nine months after death.

Now, Mary can’t sell a vehicle and she can’t sell thehome without completing the succession. In addition,it’s likely that Louisiana Inheritance Tax is due becauseshe didn’t handle the succession within nine monthsof Bill’s death, and since it’s been four years since Billdied, there will be a significant amount of interest due

on the unpaid tax.

ut of State Real Estate

The succession of a Louisiana resident governs all of the financial accounts and other “movable” property, wherever located, but it governs the real estate located

in Louisiana and not the real estate located in any others a e.



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If a Louisiana resident owns real estate in another state,something called an ancillary probate will be required inthat other state where they owned property. Each state’s

ancillary probate laws are different, but an ancillarypro ate proce ure typ ca y nc u es ng a cert ecopy of the last will and testament in that state, along with other paperwork required. This is typically doneafter the conclusion of the Louisiana succession. Oftenthe family is required to hire an attorney in that otherstate to oversee that ancillary probate.

Owning significant real estate in other states can be areason to transfer that property to an entity such asa limited liability company or a revocable living trust,so that multiple ancillary probates can be avoided instates that have a burdensome process.

ontesting the Succession

Most success ons are unconteste . e am y mem erdies, the succession is handled, the property istransferred to the heirs, and families move on.

Some successions, however, are contested. It’sunfortunate when heirs disagree. Often, no one wins. There’s a common saying: “If you want to get to really

know someone, share an inheritance with them.”

There are a number of reasons why successions arecontested. Some of them include:

person contests the validity or interpretation of the last will and testament

n heir feels that the executor is either not listinga o t e success on assets an e ts proper y,or the heir feels that the executor is not actingappropriately




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• The heirs just don’t like or trust each other (not avalid reason)

How To Contest a Succession

There are several ways a person can contest asuccession.

pposing the Appointment of Administrator

If you want to be notified when someone files an

application to be appointed administrator, you can have your attorney petition the court so you will be notified when someone else petitions the court to be appointedthe administrator. An administrator is often appointed when someone dies without a last will and testament(so they didn’t appoint an executor).

When more than one person wants to be thea m n strator, t e court w g ve pre erence to t epersons in the following order:

1. The best qualified among the surviving spouse, orcompetent heirs or legatees;

. The best qualified of the nominees of the survivingspouse, or of the competent heirs or legatees;

3. The best qualified of the creditors of the decedentor the estate, or a co-owner of immovable property with the deceased.

ontesting the Validity of the Will

When a person dies having signed a Will, the executor

will typically have the attorney file the ill in thesuccess on procee ng at t e par s court ouse, anthe judge will sign an Order stating that the Will is validand that it be followed.



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If someone wants to question the validity of the Will,they will need to have their attorney prepare a petitionstating the grounds of invalidity. When the validity

of Wills is questioned, it’s common for the person toquest on w et er t e ecease , at t e t me t at t e W was written:

had the ability to understand what he or she wasdoing; or

was influenced by someone else so that thedocument is not an accurate expression of the

deceased’s intentions

Removing a Succession Representative

The succession representative can be either theexecutor of a Will or a court appointed administratorof an intestate (no Will) succession. If you think the

succession representative should be removed, you canas or a ear ng w ere t e success on representat vemust show why he should not be removed from office.

Duties of Succession Representative

The duties of a succession representative include:

• He shall deposit all succession money in asuccession bank account

• He may invest the succession funds and makethem productive

• He may continue any business of the deceased• He may lease or sell success on property• He may pay succession debts




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ompensation of Succession Representative

If there is no provision in the Will to the contrary, or no

other agreement between the parties, the administratoror executor s a owe a ee o two an one- a percentof the succession assets. The court may increase thecompensation upon a proper showing that the usualcompensation is inadequate. In many successions, afamily member is the executor or administrator, andthat family member may waive this fee either becausethey are willing to do it for free because they are an

heir and it’s a family matter, or since the successionrepresentative’s fee is subject to income tax, he feelssatisfied receving his inheritance which is typically notsubject to income tax.

onclusion

Lou s ana succession is required when a person diesan t e n v ua a property t t e n s or nameon the date of death. The succession is the process of transferring assets from the deceased’s name to theheirs. A succession typically involves the following:

• You gather documentation regarding thedeceased’s assets and deliver it to your succession

attorney• Uncomplicated succession do not require an

administration (the court appointment of anexecutor or administrator). If an administration isnecessary, it is much easier if it’s an “independent”administration

• Your succession attorney will file documents

at the parish courthouse where the decedent was om c e . A u ge w s gn a court or errequiring third parties to transfer assets to theproper heirs.



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Louisiana’s succession procedure (other statescall it probate) is simpler than many other states. There doesn’t need to be as much emphasis on

“avoiding probate” as there is in other states ere are str ct ru es regar ng ow W s ansuccessions are to be handled. If an interestedparty has sufficient legal authority, he or she cancontest the way a succession is being handled.



Chapter 15

Nonprobate AssetsThese are important and often

verlooked

It is likely that you own nonprobate assets. Nonprobateassets are assets that do not pass pursuant to your

Will when you die. Common nonprobate assets include your retirement accounts (such as your IRA or 401(k)),life insurance, and annuities. It is important that youmonitor these assets during your lifetime and properlydesignate your beneficiaries.

Maybe you are like some people that have the bulk of their life savings in nonprobate assets. Perhaps you worked for a company that had a 401(k) plan. When you retired, you rolled your 401(k) plan assets into ann v ua ret rement account IRA . You ta e mont yor annual distributions from your IRA to pay for yourretirement. Your other assets include your home andsome smaller accounts outside of your IRA.

Perhaps you are married and your spouse has childrenfrom a prior marriage. You set up a Will and designatethat all your assets go to your children when you die.However, you fail to realize that your spouse is named




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the primary beneficiary of your IRA—your biggest assetby far. When you die, your children don’t get any of yourIRA even though you wrote a ill designating that your

children receive all of your assets when you die. What’s worse s t at a ter your eat , your spouse ro s yourIRA over into his or her IRA and when your spouse laterdies, that spouse’s IRA goes to his or her children (orperhaps his or her new spouse).

For many people, properly designating beneficiarieson nonprobate assets is just as important, if not more

important, than creating a Will or revocable livingtrust. Failing to properly designate your beneficiarieson nonprobate assets could result in your life savingsbeing transferred to people other than those closest to you.

The following are examples of common nonprobate

assets along with what you can do to make sure that your w s es are carr e out.

Retirement accounts

Retirement accounts include Keogh pensions, profit-sharing or stock bonus plans qualified under the InternalRevenue Code, an individual retirement account (IRA),

a Roth IRA, or a tax-sheltered annuity.

Traditional families often don’t encounter problems with IRAs. Traditional families are those where the twoparents had children together, and all members of thefamily agree that when one spouse dies, the survivingspouse should own the IRA, and when the surviving

spouse dies, the IRA will be divided equally among thec ren. e spouse s typ ca y name t e pr marybeneficiary and all of their children are named thecontingent beneficiaries.



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The problem occurs when the family circumstancesvary from the traditional. Often, individuals go intogreat detail when having their Wills prepared so that

spouses, children, and other loved ones are protected.But tt e, any, attent on s g ven to t e ene c arydesignation forms on the retirement accounts.

xample:Jack had two children from his prior marriage. Jack is currently married to Rachel. Jack sets up hisWill so that Rachel gets the lifetime usufruct of Jack’sentire estate, and Jack names his two children as the

naked owners. Jack has an IRA valued at $600,000, while his other assets (his interest in the home and otherfinancial accounts) total $300,000. When Jack died,Rachel received Jack’s entire $600,000 IRA because she was the primary beneficiary while Jack’s children weremerely the contingent beneficiaries. Rachel received theusufruct of the 300,000 of assets that passed pursuant

to Jack’s ill. Rachel will one day be accountable to Jack’s children for the 300,000 of assets over whichshe has usufruct. Rachel is free to do whatever she wants with his IRA, including leave it to her children(not Jack’s children) or leave it to the husband shemarries after Jack dies.

If Jack wanted his children to benefit from his IRA, he

could have named them as a primary beneficiary of partor all of the IRA (for example, 25% to each of his twochildren and 50% to his wife, Rachel), or he could havenamed a trust as the primary beneficiary of his IRA. Thetrust instrument would likely have allowed Rachel touse the IRA during her lifetime and then at her death,the remainder of the IRA in trust would go back to Jack’s

children (not Rachel’s beneficiaries).

If you name a trust as the beneficiary of your IRA,e aware that there are numerous hurdles involving




152

income tax, minimum required distributions, andtrust accounting, but doing it properly can allow youto provide for all of your loved ones regardless of your

family circumstances.

Life insurance

Life insurance proceeds, generally, are income tax freeto the beneficiaries. Life insurance is also a nonprobateasset. When you purchase a life insurance policy, youare asked to name a beneficiary on the life insurance

company’s beneficiary designation form. Even if yourWill states that you want your life insurance to goto your children or your spouse, the life insurancecompany will only pay the proceeds to the beneficiary who is designated on the beneficiary designation form,regardless of what your Will provides.

Similar to the way your retirement accounts should bean e , you want your spouse to ene t rom yourlife insurance, and you want to designate who gets theremaining funds when your spouse dies, you shouldconsider naming a trust as the beneficiary. Otherwise, your spouse will be free to leave that money to whomeverhe or she wishes (which may or may not be the samepeople you would want to have it).

Annuities

nnuities also are distributed after your death to thenamed beneficiaries. If you own annuities, make certainthat you’ve property documented your beneficiaries.Many annuity owners die without fully understanding

how the nonprobate assets are to be distributed. Someo t ese peop e may e ro ng over n t e r graves r g tnow.



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onclusion

Failing to properly designate beneficiaries on nonprobate

assets is one of the costliest and most-overlooked aspectso estate p ann ng.

If you have nonprobate assets such as retirementaccounts, life insurance, and annuities, consider thefollowing:

• Review your primary and contingent beneficiaries

regularly• If you are married and you have children from

a prior marriage, consider designating a trustas the beneficiary of nonprobate assets. This will allow you, for example, to provide for yoursurviving spouse and also provide who benefitsfrom the trust assets after the death of your

surv v ng spouse. You can es gnate mu t p e pr mary ene c ar es.For example, your spouse may be a 50eneficiary, and your children may each be 25eneficiaries

• If you name a trust or someone other than your spouse as the primary beneficiary of yourretirement accounts, be aware of the income tax

consequences as well as the often-changing rulesregarding minimum required distributions.



Chapter 16

Estate Planning Letter of Last InstructionsMake it easy for your loved ones

W

hile it is important that the proper estate planninglegal documents be in place, it is also important

that other informal items be properly documented.

xamples of additional items that should bedocumented include:

Your wishes regarding your personal effects Who to notify upon your death

Your desired funeral arrangements The location of your personal papers ccess to your ve c e t t es an reg strat on Recent statements of bank and investment

accounts Location and key to safe deposit boxes List of your debts Property descriptions for real estate you own List of survivor’s benefits




156

ersonal effects

The disposition of your personal effects, such as furniture,

jewelry, art, guns, tools, clothing, photographs, andot er nont t e assets can e one o t e most cu tthings for your heirs to handle. While it’s easy for yourtwo children to divide up the money that’s in your bankaccount, it’s not so simple for children to divide yourfamily portraits or other family heirlooms.

Disposing of your personal effects can be done generally

in one of two ways. First, you could specify who you want to get your personal items in your last will andtestament. This is often not recommended because youhave to include a detailed list of your personal effectsn your ill, and then if you want to add, delete, orchange one of these bequests, you have to go throughthe formal process of changing your Will.

n a ternat ve to st ng your persona e ects n yourWill is to create a less formal set of instructions to yourheirs where you personally and in writing, let themknow how you want your personal effects distributed.It may be in your own handwriting or it might besomething you type on the computer. The idea is notto make a formal document, but an informal request to

your heirs about how to divide these items that often donot have significant market value, but have tremendoussentimental value.

xample: Maria has a daughter and two sons. In herWill, she provided that all of her assets were to go equallyto her three children. After she had her Will prepared

by an attorney, she sat down and prepared a letter toer c ren stat ng w c persona e ects s e wanteto go to each child and grandchild. While this informalletter was not a valid legal document, Maria’s children



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honored her requests after she died and divided all of the personal effects in accordance with her wishes.

While this informal method of distributing personale ects s s mp e an wor s part cu ar y we w en aof the heirs are close, be aware, however, that if you want to make absolutely certain that your wishes arefollowed, you need to consider expressly stating your wishes in your ill.

List of assets

You should take certain actions now so that your lovedones will have an easier time settling your affairs when you are gone. One of the things you can do is completea detailed list of your assets and liabilities. Keep this list with your other important estate planning documentsand update it annually. When you die, your family will

have to produce this information to the success onattorney, an t w e muc eas er or t em to accessthe necessary information if you’ve left them a completelist of your assets and debts. Your list of assets shouldinclude:

• Real estate. A legal description of each pieceof real estate that you own. The complete legal

description can be found on the Act of Sale orct of Mortgage from when you purchased or

otherwise acquired the property.• Bank accounts. An itemized listing of bank

accounts that you have an ownership interestn.

• Investments. A listing of investment accounts

and copies of stock certificates that you own. Ve c es. Cop es o car t t es t at you own.

• Debts. A list of your creditors, such as mortgagecompanies, banks, and credit card companies.



Chapter 17

Get StartedIt’s not as painful as you might think

Because of the uncertainties of life, it’s never too earlyto begin estate planning. Having a proper estate

plan can be one of the best things you can do for theloved ones you leave behind.

Estate planning is not painful. You will not get prickedor prodded. Once your estate plan is up to date, you’llhave peace of mind knowing that you’ve done what isnecessary to have your affairs in order.

To get started, take the following steps:

Find an Attorney

There are a number of different ways you can find acompetent attorney. Some of these include:

sk your friends, neighbors and relatives whothey know that could help them with their estateplan. If they had a good experience using a certainattorney, it’s likely that you’ll also have a goodexperience.




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• Many attorneys are listed in the telephone bookor on the internet. While a referral from a trustedsource is the best bet, you will be able to find a

number of attorneys in the yellow pages or on thenternet. Ma e sure t at t ey st estate p ann ngas a significant part of their practice.

• These days, lawyers specialize. Estate planningcan be a complex field. Just as you would searchfor a specialist to assist you with a particularmedical problem, you will want to find anattorney that specialized in estate planning. The

State of Louisiana recognizes estate planning andadministration as a specialty. For a lawyer to claimhe is a specialist in estate planning, he must havepassed a test administered by the state bar, andhe must obtain additional continuing educationcredits annually.

Meet with the Attorney

Many attorneys will offer to meet with you in an initialmeeting without you incurring any cost. This is a great way for you to get to know the attorney and to find out whether you’d want to work with him. You’ll be able toask questions, and the attorney will likely make certainrecommendations to you in order to complete your

estate plan. The attorney should also be able to give you a quote or an estimate regarding the fees you will berequired to pay. Don’t ever retain an attorney withoutfirst having a thorough understanding of how you willbe charged.

Be Prepared

Once you ve ocate your attorney, t s e p u youprovide him with a general list of your assets and theirvalues. The attorney will be able to determine if there



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is any special planning that will be necessary to reducepotential tax.

When you meet with the attorney, be prepared to answert e o ow ng quest ons:

If you’re married, how do you want to leave assets to your spouse? Do you want to leave your spouse fullownership or do you want to leave your spouse usufruct?Or perhaps you want to leave assets in trust for yourspouse.

How do you want to leave assets to your children? Do you want to leave assets to them outright or in trust?If you leave assets to your children in trust, who wille the trustee and under what circumstances can your

children use the trust principal?

Do you want to leave a bequest to your grandchildren?Some gran parents want to eave a equest to t e rgrandchildren, while others want to leave it all to theirchildren. There is no right or wrong way to do it.

Do you want to leave a bequest to charity?

Who will serve as your executor? If you’re married, you

may want your spouse to be your executor, and youmay want an adult child to be your alternate executor.

Who do you want to handle your financial affairs for youduring your lifetime in the event that you can’t do it for yourself?Who do you want making your medical decisions for

you if you are unable?

Do you want to sign a living will whereby you declare your intentions regarding life support machines?




162

Once you answer these and other questions, yourattorney should have the necessary information todraft the appropriate estate planning documents.

These documents typically include your last will andes amen , your power o attorney, your ea t carepower of attorney, your living will, and perhaps trustsor other documents.

Once your satisfied with the documents, you will signthem typically in the presence of your attorney (who isa notary) and two witnesses.

In addition to signing the necessary estate planningdocuments that are customized by your attorney, youalso need to make certain that all necessary beneficiarydesignation forms are properly completed.

Storing Your state Planning Documents

Keep your s gne , or g na ast w an testament n asafe place. Some people keep their ill in a bank safedeposit box, while other people keep their Will in theirhome. The attorney should keep a photocopy of yourWill.

Let your executor know where your original ill is

located. If you keep it in a safe deposit box, make surethat you complete the necessary paperwork at the bankso that your trusted friend or relative can access thebox after your death without having to get the courtsinvolved.

Review Your Estate Plan

Don t ma e t e common m sta e o comp et ng yourestate plan, and then having it collect dust for many years. Your circumstances are likely to change over



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the years and your estate plan needs to keep up with your changing circumstances. Meet with your attorneyabout every three to five years or more often if any of the

following occur:

One of your heirs has died There is a significant change in the value of what

you own You change your mind about how you will leave

your assets to your heirs You want to change your executor or you want to

change your power of attorney You discover there is a change in the law that

may affect you You get married or divorced You incur a life-threatening illness You move into or out of the state

onclusion

In state planning, Louisiana’s laws are far differentfrom the laws of all the other states. To complete andmaintain a proper estate plan, do the following:

Find an attorney that you are comfortable with— particularly one that specializes in the complex

field of estate planning Be prepared to provide the attorney with

information about what you own. Be prepared to answer the attorney’s questions

about how you want to leave your assets behind,as well as questions regarding who you would want making important financial and medical

decisions for you when you are unable to maket em or yourse



Glossary

Administrator— the person appointed by the court whose duty it is to collect, preserve and manage theproperty of a succession. The court often appoints an

administrator when a decedent had no last will andtestament

ollation— the return of gifted assets by an heir to asuccession in order that succession property can bedivided equally. People often provide in their Wills thatlifetime gifts are exempt from collation

ommunity Property— property acquired by spousesduring their marriage in which each spouse owns anundivided one-half. Louisiana is a commun ty propertys a e

state Administration— the process of settling anestate after someone dies

xecutor— the person you designate in your last willand testament who will work with the attorney to settle your estate

state Planning— the process of arranging your affairsto that upon your death or disability, your estate will bemanaged efficiently by the people you trust, and there

will be minimal costs of succession, tax, long term care,or other costs




166

state Tax— the tax your estate must pay to the federalgovernment if your net estate exceeds the applicableestate tax exemption at your death

Force Heirs ip— t e concept n Lou s ana t at your children that are either (1) age 23 or younger at your death; or (2) unable to manage their own affairsregardless of their age, are automatically entitled toinherit from you, regardless of what you write in yourlast will and testament

ift Tax— tax you must pay to the state or federalgovernment for making a gift for the benefit of anotherperson

Heir— a person who inherits from you when you do nothave a last will and testament. The people you namen your ill to inherit from you, in Louisiana, are called

legatees

Independent xecutor— your executor who is allowedto act pursuant to a simpler probate process because you either authorized it in your Will or all of your heirsagreed to allow the executor to serve as an independentexecutor. Independent executors typically do not requirethe court authorization to act that is otherwise required

of executors.

Inheritance Tax— the amount of tax owed to the Stateof Louisiana by your heirs when they inherit from you.For deaths occurring after June 30, 2004, this tax doesnot exist if the appropriate documentation is filed withinnine months of death

Intestate Laws— t e aws t at ctate w o n er ts yourassets if you die without a valid last will and testament



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Last Will and Testament— a legal document naming your executor and describing, among other things, whois entitled to your assets when you die.

Legatee— a person you name n your ast w antestament that will inherit from you

Legitime— the amount of your estate that you mustleave to your forced heirs

Living Trust— a trust that you establish during your

lifetime

Living Will— a document whereby you express yourintentions regarding the withdrawal or withholding of life support systems

Marital Portion— the amount that a surviving spouse

is entitled to claim when the surviving spouse is “poor”n compar son to t e ecease spouse w o was r c

Marriage Contract— a document two individuals sign,typically prior to marriage, in order to deviate from thecommunity property rules.

Medicaid— the federal and state program that will pay

for all or a portion of your nursing home care if youmeet the Medicaid eligibility requirements

Medicaid Planning— the process of taking advantage of legal strategies to protect your estate in the event youneed long term care in a nursing home

Medicare— completely different from Medicaid. Medicares ea t nsurance or most sen or c t zens, pay ng mostof the cost for surgeries, doctor visits, and other medicalexpenses




168

aked Owner— the person who is entitled to ownershipof assets at the termination of the usufruct

onprobate Assets— assets that are not listed in asuccess on, suc as qua e ret rement p ans, n v uaretirement accounts, life insurance, and annuities

otarial Will— one of two forms of valid Wills inLouisiana. Most wills in Louisiana are notarial wills.Notarial wills are typically typed, they have certainrequired language, they are signed on every page, and

they are formally notarized and witnessed

lographic Will— one of two forms of valid Wills inLouisiana. It is entirely in your own handwriting, signedand dated. Olographic wills are not recommendedbecause lay people typically do not have the expertise toprepare such an important legal document as your last

will and testament

ower of Attorney— a document you sign authorizinganother to act for you during your lifetime

robate— the court-supervised process of transferring your assets to your heirs or legatees after your death.

lso known as “succession” in Louisiana

Revocable Living rust— a type of trust you createduring your lifetime, whereby you are the trustee andbeneficiary during your lifetime, and you provide whothe beneficiaries are at your death. Often used as a Willsubstitute to avoid probate

Separate Property— property that you own that isno commun ty property w t your spouse. Commonexamples of separate property are property you acquired



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efore you married, property you inherited, and propertythat was given to you by someone else

Succession— the court-supervised process of trans err ng your assets to your e rs a ter you e. Inother states, it’s called probate

Testamentary Trust— a trust, the terms of which arestated in your last will and testament. Parents withminor children often establish testamentary trusts intheir Wills

Trust— a relationship resulting from the transfer of titleto property to a person (trustee) to be administered forthe benefit of another (beneficiary)

Tutor— the legal guardian of a child under the age of eighteen

Usufruct— a r g t o m te urat on on t e propertyof another. A spouse often leaves his or her survivingspouse the usufruct of his or her estate, and names thechildren as the naked owners

Usufructuary— the person who owns the usufruct

Will— also known as last your will and testament. YourWill is the important document that you sign whichleaves your estate to your loved ones, names yourexecutor, and provides for many other aspects regardingthe settling of your estate.



ndexA

dministrator 27, 3 , 87, 133, 134, 13 , 13 , 141, 144, 14 ,14 , 16

Collation 46, 165Community Property 6, 7, 9, 10, 11, 12, 13, 14, 15, 16, 17, 31,

32, 33, 34, 38, , 57, 63, 64, , 66, 67, 68, 9, 74, 78,79, 8 , 81, 8 , 88, 89, 91, 111, 121, 12 , 165, 167, 168

Estate Administration 80, 165Estate P ann ng 1, 2, , 6, 7, 24, 33, 51, 2, 3, 80, 85, 103,

104, 10 , 107, 108, 112, 153, 15 , 157, 158, 159, 160,162, 163, 164, 165, 180

Estate Tax , 37, 38, 39, 4 , 52, 59, 60, 1, 75, 77, 78, 9, 80,81, 8 , 83, 84, 103, 109, 110, 112, 113, 128, 133, 139, 166

Executor 27, 39, 40, 43, 44, 49, 2, 0, 61, 78, 80, 133, 134,

13 , 13 , 143, 144, 14 , 14 , 15 , 161, 162, 163, 165,16 , 16 , 169

F

Forced Heirship 6, 7, 8, 1 , 18, 20, 21, 39, 53, 61, 133, 166

Gift Tax 7 , 2, 83, 166

H

He r 7, 1 , 19, 20, 21, 39, 54, 7 , 137, 139, 143, 146, 165, 166

I

Independent Executor 40, 44, 49, 60, 134, 13 , 16Inheritance Tax , 3 , 38, 61, 7 , , 77, 84, 139, 142, 16Intestate Laws 17, 33, 34, 38, 64,

L

Last Will and Testament 2, 4, 7, 9, 12, 24, 31, 33, 3 , 39, 41, 46,47, 54, 55, 69, 70, 81, 83, 10 , 109, 132, 134, 136, 143,144, 15 , 162, 165, 166, 167, 16 , 169



Paul Rabalais

173

144, 150, 151, 152, 153, 161, 16 , 167, 168, 169 Tutor 2, 108, 109, 169

U

su ruct , 8, 17, 19, 33, 34, 38, 42, 4 , 66, 70, 71, 72, 73, 74,80, 81, 83, 8 , 8 , 87, 88, 89, 90, 91, 92, 93, 94, 95, 111,112, 151, 161, 168, 169

sufructuary 7, 33, 85, 86, 87, 90, 91, 92, 93, 9 , 169

W

Will 2, 4, 7, 15, 17, 19, 20, 24, 27, 31, 33, 34, 38, 39, 40, 41,42, 43, 44, 4 , 4 , 47, 48, 49, 2, 53, 54, 8, 1, 64, 65,

9, 7 , 71, 72, 73, 78, 79, 80, 81, 83, 84, 8 , 89, 90, 91,93, 9 , 100, 101, 103, 10 , 10 , 112, 134, 13 , 137, 144,14 , 14 , 149, 150, 151, 152, 15 , 157, 158, 162, 16 ,167, 16 , 169



To schedule a complimentary consultation withMr. Rabalais, or to attend a free seminar, pleaseisit our website or contact us at any of our offices.

e Ra a a s Law F rm(A Professional Corporation)

www.rabalaislaw.come-mail: [email protected]

ffice locations

Baton Rouge location The Rabalais Law Firm230 Perkins Road, Suite ABaton Rouge, LA 0808Phone: (225) 329-2450Fax: 22 329-24 9

Mandeville location The Rabalais Law Firm

2895 Hwy 190Mandeville, LA 70471Phone: (985) 246-3020

Metairie location The Rabalais Law Firm Two Lakeway Center

3850 North Causeway BoulevardSu te 630

Meta r e, LA 0002

Phone: (504) 274-1980



In Their Own Words

Testimonials from satisfied clients of The Rabalais

Law Firm:

In our opinions, Paul’s and Stephanie’s handling of our Estate Planning:

Very professional and convinces clients of hisexpertise in the estate planning practice. We thinkPaul is trustworthy and is accountable for the plan hedevelops

During initial and follow-up meetings, Paulanswered our questions, explained strategies, and gavesound advice. All within a pleasant, relaxed, non-aggressive atmosphere.

We left feeling confident of the plan Pauldeveloped and look forward to future adjustments within a long term relationship. We highly recommend

Paul and his professional staff.

Thanks Paul!

Tommy and Diane Duncan,


Very pleased with your service! Mr. Rabalais isvery good at explaining things to people (like me) thatdo not understand lawyer language.

Vaundeleath Kotar




Mr. Rabalais was very professional, but moreimportantly, extremely knowledgeable about theinformation he presented to us. His visuals, along

with his explanation, clarified each issue precisely.I e t very con ent t at every eta o t e EstatePlanning was handled correctly and appreciated theEstate Planner in order to get everything in order.

Charles and Pat Peabody


Having our estate pre-planned provided me withpeace of mind following the death of my husband.Paul handled my affairs in an efficient and timelymanner which allowed me one less thing to worryabout.

Paul and his staff treated me with kindnessan un erstan ng a ter t e unexpecte eat o myhusband.

Evelyn Detwiler


I was very pleased to work with attorneyPaul Rabalais who is so knowledgeable about thelaw of inheritance and tax strategies in the stateof Louisiana. His degree of personal service andthorough understanding of my financial circumstances was unexpected and deeply appreciated.

Gerar Nea on




Paul Rabalais did an exceptional andprofessional job helping and guiding us through ourestate planning. He is very knowledgeable of the laws

and can really explain to the lay person. We bothagree we a to o t a over aga n we wou usethe Rabalais Law Firm, with no reservations. We willrecommend Paul to our friends and relatives.

Charles and Anita Porche

andeville, Louisiana

Thank you for providing a professionalpresentation of our personal Estate Planning package.You made it very easy to understand, considering it was quite detailed. Thanks also for the nice binderand all of the neatly arranged materials within. It

is nice to have all of the important materials in oneocat on. Thanks so much.

David and Joyce Sawyer

Port Allen, Louisiana

I thought you were very prompt, providedinformation that we clearly understood, and veryfriendly. Also the process you used was quick andeasy for us. Nice doing business with you.

Thanks,

John and Michele Cancienne Baton Rouge, Lou s ana



A very professional job. He went through theentire process in detail and presented in such a way,that any layman can understand. A job well done.

Su as an Jyotsna S a


I think you did an excellent job in all phasesof our estate planning, something we had put off for years. Had we known someone like you, we would

have done it sooner.

Lloyd and Alcyon Hayden

Roseland, Louisiana

Mr. Rabalais, an attorney, is a specialistn estate p ann ng. H s ega qua cat on,professionalism, and expertise in this area matchedour requirements. We wholeheartedly recommendPaul to those in need of this program.

Raymond and Shirley Melancon


We found Mr. Rabalais to be quiteknowledgeable and very attentive to what we desiredto do; he crafted our wills, powers of attorneys, etc.around our particular needs – and that of our heirs. Itis also comforting to know he will follow up with us on

any new or amended laws which may affect our estatep ann ng.

Bob and Wed Guillory




What a pleasant surprise! I fully expected arather painful process while getting through our estateplanning, wills, etc. (which may explain my reluctance

to have it done.)From t e rst v s t, owever, up unt our rece ptof your most-impressive portfolio of our estate affairs, we were confident that we had placed our trust in theright person. I believe that our confidence was due to your skill as a listener and communicator, and yourapparent knowledge of Louisiana Tax Laws in general,and how specific laws would affect us, in particular.

It was a most positive experience for us, Paul,and I am glad that we were led to you for help.

Ferol and Elizabeth Simoneaux

Destrahan, Louisiana

We were very p ease w t t e way Pau e peus prepare our will. We would highly recommend himto anyone planning an estate.

Jeff and Diane Alello


It is comforting to know that our children wholive out of state have someone who can help them takecare of our legal affairs once we are gone.

Agnes Titkemeyer




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