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Revocable versus Irrevocable Trusts

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In estate planning, two types of trusts are commonly used: irrevocable trusts and revocable trusts. In each case, there are advantages and disadvantages. However, both trusts are legal arrangements to manage and distribute your property during your lifetime or afterward. The creator of a trust is a grantor who funds it by transferring their assets into the trust and naming beneficiaries.

Key Differences Between Revocable and Irrevocable Trusts

The key differences between these two trust types include:

·       Control

A revocable trust allows the grantor (in Louisiana called the Settlor) to maintain control of the assets during their lifetime and make changes to the trust as needed as long as the grantor is mentally competent. This is done by naming the settlor / grantor as the trustee.  In contrast, an irrevocable trust typically transfers control of the assets to the trustee who is not the same person as the settlor / grantor. This prevents the grantor / settlor from making any changes to the trust once it is written and funded, with few exceptions.

·       Tax Implications

A revocable trust is generally treated as part of the grantor’s estate for income tax purposes but does not reduce estate taxes. However, an irrevocable trust can be structured to reduce estate taxes by removing assets from the grantor’s estate.

·       Creditor Protection

Assets in a revocable trust are generally not protected from the grantor’s creditors. In contrast, assets in an irrevocable trust can receive protection from creditors depending on the trust’s terms.

·       Probate

A revocable trust can help avoid probate, the legal process after someone dies to transfer assets to their heirs. Assets held in a revocable trust are generally not subject to probate. An irrevocable trust can also help avoid probate; however, because the grantor / settlor gives up control of the trust’s assets, it may be more difficult to change the trust to accommodate changing circumstances.

·       Privacy

Both trusts can provide more privacy than a will since the terms of the trust don’t become part of the public record. (Usually only the transfer of real estate (immovable property) would be a part of the public record, just like it would when transferring property to any other entity.)

Each trust type offers benefits and some drawbacks, and the choice between them will depend on the grantor’s specific estate planning circumstances and goals. An estate planning attorney can help determine which trust type is the most appropriate for a particular individual or family.

When to use a Revocable Trust

In some situations, a revocable trust may be the best option. There are eight circumstances when a revocable trust may be a good choice.

1.     Avoiding Probate (and the Associated Legal Fees and Costs)

One of the primary benefits of a revocable trust is that it can help you avoid probate. Assets in the trust can pass directly to your beneficiaries without the need to involve the court. Particularly with married couples, the establishment of a revocable trust generally saves money and costs in the long run over each spouse having his or her own probate proceeding.

2.     Incapacity Planning

If you become incapacitated and unable to manage your affairs, the trustee of your revocable trust can step in and manage the assets on your behalf. The trustee can properly manage your financial affairs and carry out your wishes.

3.     Privacy

A revocable trust can provide more privacy than a will since the terms of the trust don’t become part of the public record. If you have concerns about your financial affairs becoming public knowledge, create a revocable trust.

4.     Flexibility

Modifications or even fully revoking this trust type may occur during your lifetime. If circumstances change, you can make changes to your trust.

5.     Blended Families

If you have a blended family, a revocable trust can be a good way to provide for your spouse and children from previous marriages. You can specify how you want your assets distributed and ensure you fulfill your wishes.

6.     Special Needs Planning

If you have a child or other beneficiary with special needs, using a revocable trust can provide for their ongoing care and support after your death.

7.     Real Estate Ownership in Multiple States

You can avoid ancillary probate in a state other than where you live.

8.     Estate Value

This trust is a great choice if your estate is less than that federal estate tax exemption.

When to Use an Irrevocable Trust

In some situations, irrevocable trusts are the better option. There are seven specific circumstances when an irrevocable trust may be a good choice.

1.     Estate Tax Planning

You can remove assets from your estate using an irrevocable trust, helping reduce or eliminate estate taxes. Once the assets transfer to the trust, they are no longer legally part of your estate for tax purposes.

2.     Creditor Protection

Assets in an irrevocable trust may be more difficult for creditors to seize.  This can be particularly important if you are in a profession or business that exposes you to liability.

3.     Medicaid Planning

If you are concerned about the cost of long-term care and its impact on your estate, an irrevocable trust can transfer assets out of your name and into the trust. Doing so can help you qualify for Medicaid benefits if you need them.

4.     Charitable Giving

An irrevocable trust can be a vehicle for charitable giving, allowing you to leave a legacy and support causes that are important to you.

5.     Business Succession Planning

If you own a business, an irrevocable trust can transfer ownership to your heirs or to a trustee who can manage the business on behalf of your beneficiaries.

6.     Comfort with Permanence

You must be comfortable giving up control of your asset after establishing the trust.

7.     Estate Value

This trust is a great choice if your estate value is higher than the federal estate tax exemption, and you want to avoid estate taxes.

It’s important to note that an irrevocable trust isn’t as flexible as a revocable one since you can’t make changes after establishing and funding except in very limited circumstances. However, they can be a powerful tool for achieving specific estate planning goals.

How an Estate Planning Attorney can Help

An estate planning attorney can guide and assist you with revocable and irrevocable trusts to determine which will meet your goals, assets, and other factors. They may provide tax planning advice since trusts have complex tax implications and assets must be transferred efficiently.

Your estate planning attorney can draft the trust documents and ensure proper execution. If you already have a trust, they can review the documents, ensuring they still meet your needs and comply with changes in the law.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.

Creating an Estate Plan on Your Own Can Lead to Disaster

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The idea that you’ll save money by creating an estate plan on your own may seem appealing. However, it can be costly in the end, both financially and in terms of family well-being. Estate planning involves important decisions about how your assets will be distributed after you die and who will manage your affairs. Online do-it-yourself resources don’t always tailor to your specific needs and may not consider important legal requirements in your state, particularly if you live in Louisiana. Louisiana law is different from every other state, and online-prepared documents very often are not legal in Louisiana, regardless of what the website may tell you. (Just look at the site’s “fine print” and disclaimers.) The same is true for having non-lawyers (e.g., financial advisors and notaries) draft your estate planning documents. Even if legal, the document could have very expensive tax implications.

Basic Parts of an Estate Plan

A basic estate plan typically includes the following documents:

  • A Will – This document outlines who gets your property, names an executor to oversee your affairs, and designates guardians for your minor children. If you die without a will (intestate), the distribution of your assets will follow state intestacy laws and may not reflect your wishes.
  • Living Trusts – A living trust generally lets you keep your property out of probate, the court process of distributing your property after death. Probate can be time-consuming and expensive and becomes part of the public record. For these three reasons, estates with significant property often use a trust. Whether a trust is necessary for your situation can be determined with the help of an estate planning attorney. Trusts, particularly when set up by married couples, usually save money in the long run, and certainly can reduce time and hassle for your heirs.
  • Durable Financial Power of Attorney – A durable financial power of attorney names an individual to manage your finances if you are unavailable or become incapacitated.
  • Health Care Directives (Living Will and Health Care Power of Attorney) – A health care directive can name a representative to make health care decisions on your behalf when you can’t and state your preferences for health care, end-of-life care, organ donations, and final arrangements. The living will allows you to make the decision regarding life support should you be in a comatose state and in a terminal condition.
  • Beneficiary Designations – Accounts such as IRAs, 401(k)s, bank accounts, mutual funds, annuities, and life insurance policies can transfer directly to heirs outside of probate by naming beneficiaries.

Many legal strategies are considered if your estate or family circumstances are complex.

What Can Go Wrong If I Do It Myself?

Creating your estate plan may be appropriate in limited circumstances. However, many things can go wrong. The money you believe you save upfront can create financial and emotional stress for your family after your death. People pay for professional expertise to prevent problems they aren’t aware of or haven’t considered. This advice leads to more successful outcomes.

The Simple Plan

If a surviving spouse’s assets consist of the value of their home and bank accounts that are nearly equal in value, a simple will may give the home to one adult child and the bank accounts to the other. At the time the will is created, it may seem like a simple way to divide assets.

If the will is tucked away without further review or update, circumstances may change. Upon the parent’s death, the two inheritors could find one has a home that has grown in value. The other heir finds the deceased parent had to spend down cash assets to cover increasing medical bills and living expenses and inherits far less. This type of situation often leads to litigation and ruined relationships.

Beyond the financial inequity of the inheritance, a rift exists between the two siblings, which can divide the family, extending to younger generations. Over time, the parent’s simple plan did not reflect their intentions for their children.

The Legal Details

Your will, trusts, and other estate planning documents must comply with ever-changing state law. For example, drafting your will without legal oversight creates a significant risk of error. Wills must clearly state your intent. In legal terms, failing to use words such as “testamentary intention” may void the will. Similarly, using vague terms such as “I would like” may render your intentions unenforceable. Variations of legal terms are in all estate planning documents, not just a will.

Coordinating Probate and Non-Probate Assets

A will governs the distribution of assets held solely in your name. Assets owned jointly through a beneficiary designation, contract, or similar arrangements are non-probate assets. They may include 401(k)s, IRAs, joint bank accounts, insurance, real estate, and family homes. Structuring the ownership of assets to meet specific goals, like asset protection and avoiding probate, is best guided by an estate planning attorney familiar with the process.

Marriages, Divorce, Births, Incapacity, and Death

Many events can profoundly alter a person’s life — divorce, disability, death, substance abuse addictions, and the like. They also may change how you distribute assets in your estate. These types of issues can be particularly bothersome with blended families.

An estate lawyer can regularly review your documents with you to ensure they reflect your current family situation. They can also draft documents for power of attorney so that if you become incapacitated, a plan is in place for your estate’s management and health care wishes. A routine review of your estate plan is essential to handle significant life events and account for any changes in estate planning laws.

Other Challenging Arrangements

Every person’s life and estate are unique. A template can’t accommodate all eventualities.

  • Same-sex and unmarried couples face different challenges as the law tries to catch up to less traditional marriage and living arrangements when making an estate plan. A partner could be left without an inheritance if estate documents aren’t carefully executed to comply with state laws.
  • Special needs planning for loved ones who are disabled requires targeted planning so they continue to receive financial assistance and maintain eligibility for government benefits.
  • Some estates require complex arrangements to reduce state and federal taxes or multi-state and international issues.

The challenges are so varied that you risk creating an unenforceable estate plan without the guidance of an estate planning attorney.

Take Your DIY Will to an Estate Planning Attorney

An estate planning lawyer provides more than technical expertise in drafting complex documents. They can provide guidance and counseling for important decisions, helping you identify the best representatives to manage decisions and actions required in your estate plan. A do-it-yourself estate plan is often incomplete or incorrect. Any mistakes or oversights can lead to legal complications or disputes among heirs. The following old adage usually proves to be true:  Don’t be penny-wise but pound foolish.

For most people, working with an experienced estate planning lawyer is essential to ensure documents meet your needs, goals, and legal requirements. While saving money using a do-it-yourself approach may seem tempting, the risks can far outweigh any potential cost savings.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.

A Guide to Estate Planning for Young Families

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The importance of estate planning cannot be overstated. If you’re a young couple with minor children, estate planning can help protect your family in case of a medical emergency, such as incapacitation or death. While it’s difficult to think about what happens to your children if you die, ensuring enough money is available for their needs is necessary for them to flourish. Estate planning can protect your family, name your children’s guardians, and explain how you want your assets distributed.

A caring.com 2023 survey reports two out of three Americans have no estate planning documents. Post-pandemic economic conditions are increasing the need for financial planning, including end-of-life and estate planning. Combining financial goals with estate planning objectives provides for your loved ones and creates a foundation for multigeneration wealth.

Wills

Your will is where you can name a guardian for your minor children, called a Tutor in Louisiana. Waiting until a medical diagnosis or health concern to make a will is risky. If you are seriously injured or ill and can’t communicate, it’s too late. Health concerns may also raise issues about your decision-making abilities. Identifying a guardian for your children takes thought, time, and some negotiation with the person who will commit to raising your children should the need arise.

A will is the most common type of estate planning document and can address several other things, such as distributing money and property to loved ones and paying debts. For some people, a will may be all that is required to address what happens after their death.

However, some require additional estate planning documents, like a trust, for greater control and preservation of assets before and after death. Trusts and powers of attorney are especially important for families with children or adults with disabilities, as well as aging parents in need of long-term care. They are particularly important for families with significant estates or loved ones who are prone to miscommunication and disputes. The sooner you begin your estate planning, the better the outcome. Finally, trusts can be a big help in reducing quarrels in blended families.

The Estate Planning Process

Estate planning doesn’t have to be overwhelming, but it can be complex. There are some simple steps to get started, including:

Gathering financial and other relevant documents

Even if some of your paperwork is stored online, print a summary copy. Having the documents in front of you provides a bigger picture of what to address today and plan for tomorrow. You may notice gaps in your approach.

Making a will

This legal document outlines how you want your assets distributed after your death, names guardians for your children, specifies how to divide assets among heirs, and names a personal representative or executor.

Designating beneficiaries

Retirement accounts, life insurance policies, and other financial accounts have beneficiary options allowing you to pass assets directly to the named beneficiary. These designations will override any instructions in your will, so keeping them current is important.

Considering a trust

A trust can provide additional protection for your assets and help avoid probate. A trust may be a good option if you have significant assets or a complex family situation. Trusts are also a great way to minimize the stress and hassle of your loved ones after you pass away and reduce and often eliminate probate costs.

Creating advance directives

Also known as health care directives, a living will explains your end-of-life wishes for care and treatment, and a health care power of attorney names a trusted person to make medical decisions in the event of incapacitation.

Naming a durable power of financial attorney

This individual can manage your financial affairs if you can’t.

Reviewing and updating your plan

Your estate plan needs periodic review and regular updates to reflect changes in your family situation, assets, and laws.

Seeking professional help

Working with an experienced estate planning attorney can help ensure your plan is comprehensive and tailored to your needs.

Estate Planning Barriers

You might have plenty of time to implement your estate plan, or you might not. We never know when accidents or illnesses may strike. Putting off your estate planning leaves your partner and children at risk.

A 2023 caring.com survey found forty-two percent of people say procrastination is the main reason they don’t have a will or other estate planning documents.

A young family needs to work their way toward financial stability and find ways to protect it. Even if you don’t have significant assets, you can make valuable decisions, such as taking out a life insurance policy to benefit your spouse and children. Young, healthy parents can get term life insurance at reasonable rates.

An estate planning attorney can help you select the most effective life insurance policy. In some cases, they may recommend an irrevocable life insurance trust. A life insurance trust permits life insurance policy proceeds to pour directly into the trust, becoming immediately available to your beneficiary.

How Can an Estate Planning Attorney Help Young Families?

Estate planning attorneys help assess your family’s unique needs and circumstances, creating a customized estate plan addressing your specific goals and concerns. Their experience can help identify potential risks and provide recommendations to minimize them, ensuring all documents complement each other and are legally correct.

Accurately drafting important legal documents, such as your will, trusts, powers of attorney, guardianship, and advance healthcare directives is critical. An estate planning lawyer can ensure these documents are legally binding for the state where you live and accurately reflect your wishes.

For young families, it’s crucial to receive legal advice in areas such as tax planning, asset management, asset protection, and, if appropriate, business succession planning. An estate planning attorney can help you understand the legal implications of your decisions so that you make informed choices.

Your attorney can also plan to routinely review and update your documents with you to reflect changes in your family, finances, or laws. And, in the event of your death, an estate planning attorney can help your family navigate the probate or trust administration process and settle your estate according to your wishes.

It’s in the best interest of a young family to seek the valuable guidance and support of an estate planning attorney to help to navigate simple and complex estate planning needs. Speak to an estate planning attorney today and leave a lasting legacy for your loved ones.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.

Understanding the Basics for Estate Taxes

Understanding the Basics for Estate Taxes

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The US imposes estate taxes on assets transferred from the estate of a deceased individual to heirs or beneficiaries. In understanding the basics for estate taxes, an estate tax is not the same as an inheritance tax. It’s a tax on the total value of a person’s assets at the date of death. The estate pays the tax before any assets are distributed to beneficiaries or heirs.

In contrast, inheritance tax is based on the value of assets that an individual beneficiary receives. The tax responsibility is on the beneficiary, not the estate, and tax rates can depend on the relationship between the decedent and the beneficiary.

US Estate Taxes Overview

US estate taxes apply only to high-value estates. The amount adjusts annually for inflation, and for 2023 is $12.92 million per individual—higher estate tax exemptions will sunset on December 31, 2025. Projections vary slightly but align with a 2026 estate tax exemption cut in half to about $6.8 million per individual. Any value exceeding the current year’s exclusion limit is subject to tax.

The Internal Revenue Service requires any estate with prior taxable gifts and combined gross assets exceeding the threshold to file a federal estate tax return and pay estate tax. Therefore, any estate valuation in 2023 over $12.92 million per individual will pay tax on the overage amount. Executors, or personal representatives, are responsible for filing the estate’s return and paying any taxes owed by the estate, from the estate, over that year’s exclusion amount.

Unlimited Marital Deduction

A provision in the US Federal Estate and Gift Tax Law allows an individual to transfer an unrestricted amount of assets at any time to their spouse free from tax. This transfer includes the date of death of the transferor.

However, this unlimited deduction from estate and gift tax only postpones the taxes on the property inherited from each other until the second spouse dies. After the surviving spouse’s death, all estate assets over the exclusion amount are subject to the survivor’s taxable estate.

Assets Subject to Estate Tax

The estate tax applies to the fair market value of assets such as cash, real estate, stocks, bonds, and personal property, including art, jewelry, and other collections. Life insurance proceeds paid to a beneficiary are generally not subject to estate tax but may be included in the estate if the deceased owns the policy.

Exemptions and Deductions

Certain deductions and exemptions can help reduce the amount of estate taxes owed. For example, a married couple can pass on their estate to their spouse without incurring estate tax at that time. Additionally, charitable donations made from the estate can qualify as a deduction from the taxable amount.

Reducing Estate Taxes

Estate tax law can be complex, and an estate planning attorney can provide valuable guidance and assistance when minimizing the impact of estate taxes. Here are some ways an estate planning lawyer can help:

  • Creating an estate plan minimizes the impact of estate taxes. An estate planning attorney can help you explore various strategies, such as gifting, trusts, and other tax-efficient structures, to reduce the size of your taxable estate.
  • Reviewing and updating your estate plan and making revisions every year or so ensures it’s optimized to minimize estate taxes.
  • Estate planning strategies can reduce the impact of estate taxes, such as gifting, trusts, and life insurance. These strategies are complex and are customized to each individual’s unique circumstances.
  • Ensuring compliance with tax laws and regulations that govern estate taxes ensures you are taking advantage of all available deductions and exemptions.
  • Helping to file estate tax returns to ensure all necessary information is included and the return is filed accurately and on time.
  • Providing guidance to executors and trustees with a fiduciary responsibility to manage the estate in a way that minimizes taxes and maximizes the value of the assets for heirs and beneficiaries.

An estate planning attorney is a valuable resource for individuals concerned about estate taxes and minimizing their impact.

Estate Taxes by State

In addition to federal estate taxes, some states have their own estate or inheritance taxes. Currently, twelve states levy an estate tax upon your death. Like federal estate tax law, state-level estate taxes can change. There may be additional requirements for exemptions that apply depending on the year. If you are concerned about estate taxes in your state, it’s a good idea to consult with an estate planning attorney for guidance and advice specific to your situation.

Spending Down Your Estate

Reducing the size of your estate can minimize or avoid federal estate tax. Enjoy your wealth if you aren’t afraid of running out of money before you die. Travel, live lavishly, and give your assets to loved ones that may improve their lives while you can enjoy the experience. You can give away your assets to a qualifying charity and deduct them from your estate. Also, you can use an irrevocable trust to shield assets that legally shelter them from federal or state estate taxes. You can even relocate to a more favorable tax environment if you live in a state that levies estate taxes.

Creating a Plan

Your estate planning goals define the steps you take. Establish a clear idea of what you want to happen, to whom you want to give, who will handle your estate, and how estate taxes can be avoided to protect the legacy you leave to your loved ones.

An estate planning attorney can help you gather and organize your financial data to determine your net worth and establish estate tax avoidance strategies, review all existing beneficiary selections, and make updates where appropriate. They help you understand the importance of how you hold title to your property.

Create your estate plan today, knowing you can modify much of it as your family situation changes. Estate taxes may be an important consideration if you have a large estate. By understanding the basics of estate taxes and working with an estate planning attorney, you can ensure your assets transfer to your loved ones in the most tax-efficient manner possible.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.

Preparing Your Family for the Unexpected

Preparing Your Family for the Unexpected

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Making sure your affairs are in order in case of unforeseen circumstances, such as an accident, incapacitation, or death, is what planning for the unexpected involves. If the COVID-19 pandemic taught us anything, it’s that life is uncertain and that caring for you and those you love is imperative, including legal preparedness. An elder law attorney and estate planning attorney can address your concerns and help prepare your family for the unexpected.

Elder and Estate Law

Elder law focuses on legal issues affecting elderly individuals, including health care planning, long-term care planning, Medicaid planning, and guardianship (in Louisiana callee interdictions). They help clients plan for their future needs and ensure protection in cases of incapacity or disability.

Estate law focuses on legal issues relating to the transfer of assets after an individual’s death. They help clients plan for the distribution of their assets, minimize taxes, and meet goals by creating wills, trusts, and other legal documents.

Both elder and estate law overlap significantly, particularly in end-of-life planning and long-term care. For example, an elder law attorney or an estate planning attorney can assist clients in creating a living will or power of attorney for health care decisions. A significant difference between the two legal practices is one focuses primarily on the needs of individuals while living, and the other plans the distribution of assets after an individual’s death.

Why Planning is Important

Many things can happen over your lifetime, and much of it is unexpected. But we can be aware of potential problems and prepare for uncertainty.

 

·       Healthcare Planning

Put a health care plan in place in the form of advance directives, such as a living will or durable health care power of attorney, ensuring your wishes are followed if you become incapacitated and unable to make decisions. Your loved ones won’t have to struggle with decisions during a difficult time.

·       Financial Planning

Financial hardships happen due to emergencies, requiring additional financial resources, insurance, and more to successfully manage unexpected events.

·       Digital Planning

Ensure your legal documents have digital copies on secure networks, making important documents and information accessible online to those who have your login credentials. Keep a list of credentials in a safe place and let a person you trust know the location.

·       Estate Planning

Many individuals not only create an estate plan, but regularly update their wills, trusts, and other legal documents to ensure their wishes are carried out, and their assets receive protection in case of illness or death. Your estate planning also protects the future of your loved ones.

Legal Planning for the Unexpected

Legal planning means having your affairs in order in case of unforeseen circumstances. These are six steps to increase preparedness:

1.     Create a Will

Not enough people in America have a will. This legal document outlines your asset distribution after your death. If you already have a will, review and revise its contents to address changes.

2.     Designate Beneficiaries

You can designate beneficiaries on your bank accounts, retirement accounts, life insurance policies, and other assets. Revise your beneficiary status in the event of a death, divorce, marriage, or other major life changes so you’re your asset distribution will reflect your intended beneficiaries.

3.     Create a Power of Attorney

A power of attorney allows someone you trust to make legal, financial, and medical decisions on your behalf if you become incapacitated.

4.     Create a Living Will

A living will outlines your end-of-life wishes. It includes whether you want to be kept alive through artificial means.

5.     Consider Setting up a Trust

A trust can manage and distribute your assets during your lifetime and after your death. It can minimize probate costs and protect privacy of your loved ones at your death. Furthermore, it often is a less expensive in the long run and more stress free for your heirs.

6.     Review and Update Your Plan Regularly

It’s important to review and update your plan regularly to ensure it reflects your current wishes and circumstances.

Consulting with an elder law attorney or estate planning attorney can help create and ensure your legal documents are thorough and complete. Preparing for an unexpected crisis will reduce the stress on yourself and your family members. A comprehensive legal plan that can address your desires during times of uncertainty can bring you and your loved ones peace of mind.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.

Having a Will vs. Not Having a Will

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Having a Will vs. Not Having a Will

People are afraid of death, especially their own. Add to that the question of what will happen to their assets after they die, and it’s no wonder so few people have estate plans.

According to a 2021 Gallup poll, only 46% of US adults have a will. This is a slight increase from 2016 when 44% had a will. Still, less than half of US adults have taken the time to create this important document. The poll also showed that older adults are more likely to have a will than younger adults. Of those polled who were over the age of 65, 76% said they have a will. It’s important to know your options on having a will vs. not having a will.

Dying Without a Will

If you were to die without creating a will, depending on the type of and amount of property involved, a state probate court may have to choose an administrator to manage the probate process for your estate and choose a guardian for any minor children you have, provided the children’s other biological parent is deceased or unable to care for them. The downside to this process is that the decisions the probate court and the administrator would make may not align with what you would want.

Dying without a will is known as dying intestate.  It  can sometimes create problems as to what happens to your assets and children. When your intentions aren’t known before you die, you set the stage for potential conflict among your family members and heirs. Although the law will divide values up equally among the legal heirs, without the will to use as a guide, the administrator has to guess what you would want and have the probate court approve it.  This places an undue burden on the administrator, who is often a family member.

The administrator’s duties generally include the following:

  • Locating all your living heirs and notifying them of your death
  • Compiling a list of your assets
  • Paying off any debts and taxes that are owed
  • Collecting any money owed to your estate
  • Distributing any remaining assets to beneficiaries deemed valid by the probate judge

To avoid creating conflict that could cause rifts in your family, draft and execute a valid will spelling out how you want your estate distributed, who should become the guardian for any minor children, address funeral arrangements, and what should be done with your remains.

Dying With a Will

When you have a valid will, it often makes life for your survivors much easier. In a will, you can appoint a person you trust to manage your estate after your death. The person you appoint is known as the executor for your estate. A will acts as their guide.

Even if you have a will, your estate still has to go through the probate process. The first step in the process is for the named executor to file your will with the probate court. The court then determines the authenticity of your will. Upon confirming that your will is valid, the probate court officially appoints the executor, most likely the person named in your will, to carry out the administrator duties. Generally speaking, as long as you don’t leave out forced heirs and your wishes in your will are not contrary to law, the executor the court will divide things out the way you have spelled out in your will. (Forced heirs are children under 24 years old or disabled. Disabled grandchildren can also be forced heirs. Forced heirs are generally entitled to a portion of your estate regardless of what your will says. There are several exceptions.)

Avoiding Probate

Regardless of whether a person dies with a will or not, the probate process exists to help ensure the decedent’s bills and taxes are paid and that their assets are distributed fairly. Though this sounds good in principle, the probate process can be a long and expensive process. And since the process takes place in the court system, it’s open to the public and the will can be contested. For these reasons, some people create trusts for their assets before they die. Their estates can settle outside of probate court and there is less of a chance that family members can successfully contest the will. Furthermore, trust-based estate planning, particularly with married couples, may be a money saver in the long run.

Consult with an estate planning attorney about your options. You may be able to keep your estate out of probate and leave a better legacy for your heirs.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.

What is a Power of Attorney?

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An integral part of estate planning is implementing Power of Attorney (POA) documents. All states recognize powers of attorney, but rules and requirements will differ from state to state. The document gives one or more individuals the legal authority to act as your agent or proxy on your behalf. Depending on which POA you choose, the agent’s power may be limited to a particular activity, such as a real estate sale, or cover broader applications.

Permanent and Temporary Powers

A Power of Attorney may give permanent or temporary authority and be invoked immediately or be activated by a future event, such as mental or physical disability. The latter is known as a “springing” Power of Attorney. Powers of Attorney may be rescinded, but most states will require written notice of revocation to the named individual or entity.

Durable, General, and Non-Durable Powers

Some Powers of Attorney are nondurable for the sake of convenience, especially in the case of a single transaction, such as a property sale. Your agent may conduct the sale of a boat or a home described in the POA document. If you are traveling abroad or know you can’t transact this business, a nondurable power of attorney can be greatly beneficial. Once the time period or transaction is complete, the nondurable power of attorney terminates.

A general power of attorney permits the agent to deal with any matters on your behalf that state law allows. Under such an agreement, the proxy may sign checks, handle bank accounts, sell property, manage assets, and file taxes when you are unable. This POA has a wide latitude of authority. Therefore, there needs to be coordination between you and your agent to ensure your best interests are always represented.

The better-known Powers of Attorney are durable and take effect upon incapacitation. The word “durable” means the powers will remain intact even when you can no longer manage your affairs. There are two types of Durable Powers of Attorney. One handles financial matters, and the other manages medical affairs, often called a healthcare directive.

Avoiding Guardianship and Conservatorship

Without these Powers of Attorney in place, a court may need to appoint individuals to act on your behalf upon your incapacitation. Depending on your state laws, these individuals are known as conservators, guardians, or committees. This type of court intervention can be expensive, time-consuming, and is a public proceeding. Most people prefer to keep their matters private by implementing powers of attorney documents in their estate plans to avoid conservatorships.

Financial Power of Attorney

This durable power of attorney permits an agent to manage your financial and business affairs, similar to a general power of attorney. When you become incapable of managing your affairs, the agent’s responsibility is to carry out your wishes to the best of their ability. If the financial power of attorney is also a beneficiary of your estate, they must act with great care to avoid misinterpretation of intent. This document is not just for seniors. An unforeseen illness or unfortunate accident can render a healthy, younger individual incapacitated and in need of financial assistance.

Healthcare Power of Attorney (HCPA)

An HCPA is also known as a healthcare proxy and permits a designated person or agent to make healthcare and medical decisions according to your specific instructions or their best understanding of your wishes. Again, consenting to an HCPA agent for medical care decisions is not only relevant to seniors. An unforeseen illness or accident can render a healthy, younger individual incapacitated, which is why an HCPA is a crucial estate planning document.

The best way to establish powers of attorney is to locate a qualified estate planning attorney. They can help you assess which power of attorney is necessary for your unique situation. They also understand the criteria for identifying the individuals or agents to represent your interests. Delegating general and limited powers to agents can create family strain during the planning stages. An estate planning attorney is familiar with the nuances of these family issues should they arise and how to move forward for all concerned. The biggest benefit of having these matters settled before incapacitation or death is allowing a family to care or grieve for their loved one instead of being bogged down in logistics.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.

Will Writing for Blended Families

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Many American families have stepchildren today, and it is not uncommon for them to receive the same treatment as full biological children when it comes to inheritance. This is particularly true where stepchildren are part of a blended family from an early age. Biological siblings may have different feelings about a stepchild inheriting what they perceive as theirs as a natural heir. A surviving spouse may have the same feelings about their children’s inheritance.

Transferring an Inheritance

Estate planning for blended families is key to a smooth inheritance process, especially since probate rules and intestate succession law do not treat step and biological children the same when it comes to inheriting. Open communication about your estate plan is also helpful in managing heirs’ expectations.

Trying to be equitable among your heirs can be tricky, and relying on your spouse and children to work things out after you are gone is not a good plan. To create a solid plan, carve out some quiet time and identify your most important estate planning goals, including distributions of all assets.

These assets include your house, car, jewelry, other personal items, investments, retirement plans, brokerage accounts, and insurance. If you opt to gift items before your death, be certain you no longer include the asset or property in your estate plan. Even items of little financial value may be an expected inheritance from a child. The goal is to reduce tensions among family members.

Creating a Trust

Share your ideas with your spouse and agree on a basic approach, including scenarios for who might pass away first. Leaving property outright to a surviving spouse may not be the best approach as it does not ensure the children, step or otherwise, ultimately benefit. Many blended family systems use a trust to provide for a spouse while leaving their property to their children.

Will Contests

Stepchildren can contest a will to be treated as a full biological child if they are named in a prior will. A will that was written before a remarriage creates an opportunity to contest. Note that your stepchildren have very little chance of inheritance without a will. Dying without a will or intestate prevents your stepchildren from inheriting in all but a very few states. In states where they are eligible, stepchildren will be considered last in line to inherit because of the laws of intestate succession.

A stepchild named in a previous will can challenge on the grounds of undue influence, lack of capacity, mistake, fraud, or coercion. If the will being contested is thrown out of probate, estate inheritance reverts to the next most recent will. A stepchild must be named in at least one prior will to have “standing” to challenge the will. If all wills are invalidated, the state will treat stepchildren as intestate heirs.

Separate Wills

Even if a biological parent, in concert with a stepparent, makes their wills simultaneously and identically to leave the estate to one another, a surviving spouse can change their will upon the death of the other. It’s possible they may then exclude the stepchildren. But, if the original will left equal shares to biological and stepchildren, a stepchild could contest to have the most recent will invalidated.

Reciprocal or Mutual Wills

Most states do not recognize reciprocal or mutual wills as a binding contract. A mutual will can only be enforced if it specifically constitutes a binding contract that can’t be changed. It’s far more reliable to create a trust to care for a surviving spouse and your children’s inheritance than depend on mutual wills and goodwill after you’re gone.

While contesting a will is permissible under certain circumstances, there is no guarantee it will be successful. To ensure your legacy wishes are met, consult with a qualified estate planning attorney who understands the intricacies and nuances of estate planning for blended families.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.

Estate Planning for LGBTQIA+ Communities

Estate Planning for LGBTQIA+ Communities

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To protect your assets, your wishes, and your loved ones, estate planning is crucial regardless of gender identity or sexual orientation. Estate planning for LGBTQIA+ Communities you to designate your partner, whether you are married or not, as the person who can make decisions for you if you are unable to make them yourself. This offers protection against discrimination by people who may be reluctant to recognize your relationship. You can also provide financial support for your partner in your estate plan.

How RFMA Affects Same-Sex Couples

On December 13, 2022, President Biden signed the Respect for Marriage Act (RFMA). The RFMA requires the recognition of valid same-sex and interracial civil marriages by the US federal government and all US states and territories. Note that this law doesn’t apply to unmarried couples. However, unmarried couples can still get partnership decision-making benefits and privileges by way of a different type of estate planning. However, you define your partnership, creating a valid estate plan to protect yourselves is possible and important.

With proper estate planning, married same-sex couples may receive all federal and state benefits of marriage, including unlimited marital deductions for federal estate and gift taxes. By using other legal strategies, unmarried same-sex, transgender, or non-binary couples who can’t receive marital tax benefits can still ensure they will receive the legal right to inherit each other’s assets. They will also be able to make financial and healthcare decisions for each other.

Trusts for the LGBTQIA+ Community

Whether you’re in a marriage or a similarly committed relationship, a revocable living trust allows you and your partner to nominate each other as trustees of your respective trusts. This will allow you and your partner to manage each other’s financial affairs if one of you becomes incapacitated. A trust is also the best way to ensure your loved one receives the assets and privileges you want them to have. If a same-sex, transgender, or binary couple has children, in which one parent is a biological parent, a trust allows the biological parent to name the other parent as guardian of the children while they are minors if the biological parent were to become incapacitated or die.

Durable Financial Powers of Attorney for the LGBTQIA+ Community

A durable financial power of attorney is an easy way to designate your partner as the person who may handle your financial affairs if you become incapacitated. Durable financial powers of attorney documents vary somewhat from state to state, so it’s important to review and modify this document if you move to a different state.

Advance Health Care Directives for the LGBTQIA+ Community

Executing an advance health care directive allows you to specify medical treatments you want or don’t want. It also allows you to name a person, or persons, to make health care decisions for you if you are unable to make them yourself. An advance health care directive can prevent your biological family members from interfering with your partner’s ability to make health care decisions for you.

Including a HIPAA form with your advance health care directive is important. The form permits health care professionals to disclose pertinent health information and medical records to your partner.

Wills for the LGBTQIA+ Community

A will allows you to name a person to act as executor of your estate after you pass away. An executor is tasked with producing an inventory of your estate, paying all credible debts, paying remaining taxes, and distributing assets to heirs. In your will, you can indicate to whom each asset should be allocated.

If a same-sex, transgender, or binary couple has children, in which one parent is a biological parent of the children, a will addresses guardianship of the children if the biological parent dies while they are still minors. This can help prevent a custody battle between the surviving parent and the children’s biological parent’s family.

Before finishing your estate plan, you should make sure you tie up any loose ends from any previous committed relationships. If you were in a legal union before same-sex marriage was an option, you might be subject to updated state laws that now consider your previous legal union as a lawful marriage. Some states have automatically converted registered civil unions or domestic partnerships into legal marriages.

Prior to the US Supreme Court’s Obergefell v. Hodges ruling in 2015, some same-sex couples married in states that recognized their marriage but then moved to states that did not recognize their marriage. Some of these couples may have split up without legally dissolving their marriage, believing it was no longer valid in their new home state. Many LGBTQIA+ people are unaware they are still married to former partners. This can lead to the possibility of future claims against their estate from a former partner.

Estate Planning is Important for Everyone

Estate planning can be especially beneficial for non-married LGBTQIA+ couples in a committed relationship. If you and your partner have not properly executed adequate estate plans, state laws will, by default, grant rights to biological family members. This may contradict your wishes.

Members of the LGBTQIA+ community have unique needs that can potentially make estate planning more nuanced. We are happy to meet with you to discuss how to properly document your wishes regarding the inheritance of your assets, who can make decisions for you if you’re unable to, and who should care for your minor children if the need arises.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.

Common Mistakes in Special Needs Planning

Common Mistakes in Special Needs Planning

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Statistics show that 26% of American adults live with some form of disability–  more than you might think. However, federal and state benefits, such as Medicaid and Supplemental Security Income (SSI), are available for persons with special needs. These benefits are “needs-based,” which means the amount of assets and income the beneficiary can have are very limited.

When planning for a loved one with special needs, you must ensure they don’t receive money or other assets thatcould cause disqualification from their government benefits. Here are some common mistakes in special needs planning.

Gifts

Gifts of money or assets from well-intentioned family members or friends can disqualify a loved one with special needs from government benefits. This would cauwe their countable assets to exceed the acceptable limit. After getting disqualified, it can be difficult to requalify for benefits. It’s better to have gifts go to a special needs trust or a similar financial planning tool set up for the benefit of the recipient.

Disinherit

Some parents believe if they disinherit their child with special needs, that child’s siblings will help take care of them for the remainder of their life. This plan puts a lot of responsibility on the other siblings and can fall apart for many reasons. If the inheritance is in the siblings’ names, it could be lost due to divorce, lawsuits, bankruptcy, or irresponsible spending. Additionally, Louisiana’s forced heirship laws can foil such a plan. Forced heirship requires that a special needs child (or grandchild in some circumstances) must received a certain amount of a decedent’s estate after he or she dies.

Lack of a Trust

Failing to create a special needs trust for your loved one with special needs is a common mistake.  Government benefits are used for basic living expenses, such as housing, food, and medical care. Therefore, a person with special needs usually won’t have enough money for other expenses, such as travel and hobbies. Creating a special needs trust can make funds available for expenses that government benefits don’t cover.

Crowdfunding

Similar to gift-giving from family members and friends, donations from a crowdfunding campaign can negatively affect your loved one with special needs. By pushing their countable assets over the acceptable limit. If you want to create a crowdfunding campaign to benefit your loved one with special needs, find a way to keep the funds out of your loved one’s name. Again, a special needs trust could be a good option.

Consult an Attorney

The best way to avoid making mistakes that could cause your loved one with special needs to lose their government benefits is to consult with an attorney experienced in elder law and estate planning. They will be able to help you find the best solution for your particular situation.

Our law firm is dedicated to informing you of issues affecting persons with special needs. We help you and your loved ones plan for the best possible future. Contact us today to schedule an appointment.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.