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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.

Discussing Inheritance with Your Children

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When you don’t discuss your inheritance with your adult children, you risk negatively affecting their decision-making. Managing expectations and knowing how the inheritance situation will affect them can lead to better decisions. These are practical matters of allocating resources for things like housing, retirement, 529 plans, and more.

When children don’t understand your inheritance intentions, it can result in arguments and legal battles among siblings and other heirs after you’re gone. The solution is a mature discussion with your inheritors, sharing details of your estate plan relevant to your child. You can withhold actual numbers by  a range, such as enough for a home downpayment, can provide a sense of magnitude without committing to exact amounts.

The Great Wealth Transfer

According to the Federal Reserve, the baby boomers are the wealthiest generation in US history. Baby boomers hold 70 percent of disposable income in the US and spend over $548 billion annually. Forbes cites research firm Cerulli Associates stating that as much as $84 trillion may change hands by 2045, and much of the wealth is from high net-worth baby boomers. Millennials will control five times as much wealth in 2030 as they do today. Are they prepared for responsible stewardship?

Many who currently have substantial wealth have concerns that if their children know the extent of their wealth, it will reduce their motivation for productivity and growing into responsible citizens. Most parents prefer their children to live a “real” life, learning to grow their success independently of their parent’s wealth. However, wealth is relative, and many parents also fear losing their ability to cover retirement, medical expenses, and long-term care, maintaining their quality of life while protecting their legacy. Because of this uncertainty, generally managing the expectations of their children’s future inheritance is better than providing exact amounts. Things can change.

Failure to Prepare

Failing to prepare children for what they may inherit can hinder their ability to handle money wisely. Many suddenly feel separated from their friends, isolated, or even confused about relationships. Others may be wasteful and spend their newfound money irresponsibly. Those who inherit even a modest amount can be just as irresponsible without guidance. BLB&B Financial Advisors cite, “it takes the average recipient of an inheritance just 19 days until they buy a new car!” It’s all too common for some inheritors to go further and splurge on lavish vacations and fast living.

The Conversation

Experts agree it’s important to talk to children about money and wealth during their adult years to help them learn how to manage money and live beneath their means as a lifestyle habit. Imprinting values, the opportunities money can provide, and their hopes of what they want to accomplish with money are good conversation starters. Providing your younger children with a modest sum of money and parental oversight can teach them how to save and invest, spend wisely, and even demonstrate the importance of supporting charities.

Of course, one of the most effective strategies to teach children about values, spending, and investing money is by example. Parents must use their money in a way that reinforces their values. One way to foster a positive relationship within the family is to purchase a vacation home where everyone gathers for summers, holidays, or annual family gatherings. Other techniques involve permitting children to choose charities to support and provide donations. If your children see you living your values, they will likely adopt similar values.

Estate Planning

Talking to your children about inheritance is an integral part of estate planning. Being transparent, fair, and open to their emotions can help ensure a smooth transition of your assets to the next generation. Keep a few things in mind during discussions:

·       Timing is Important

Have these conversations when children are mature enough to understand the implications of inheritance. Don’t create unnecessary anxiety or misunderstandings by starting the conversation too early.

·       Be Transparent

Be clear about your estate intentions and plans without getting too detailed about the numbers. Being open about your goals and hopes for them can help avoid future conflicts and misunderstandings. Not providing exact numbers keeps your estate planning flexible.

·       Consider Fairness

Consider what is fair and equitable when dividing your assets among children. Each child does not necessarily need to have an equal amount. Consider factors such as their financial situations, relationships with you, and levels of need.

·       Address Emotions

Inheritance can be an emotional topic for everyone. Acknowledge and address any feelings of anxiety, guilt, or resentment that may arise during the conversations.

How an Estate Planning Attorney Can Help

There are several ways an estate planning attorney can help when organizing your children’s inheritance, including:

1.     Legal and Tax Implications

Estate planning attorneys understand the current legal and tax implications of inheritance. Your lawyer can help you navigate complex laws and regulations, ensuring your assets’ distributions are most efficient and tax effective.

2.     Drafting Legal Documents

Estate planning attorneys can draft wills, trusts, powers of attorney, and more to help you plan for your children’s inheritance. Tailoring these documents to your specific needs ensures your assets are distributed according to your wishes.

3.     Reviewing and Updating Documents

Estate planning attorneys can review your existing planning documents to ensure they are up-to-date and reflect your current wishes. They may also recommend changes based on shifts in your family or financial circumstances. Informing your adult children of substantial changes is crucial in your inheritance conversations.

4.     Guiding Asset Protection

Estate planning attorneys can guide strategies to protect your assets from potential creditors or legal claims. They can also help plan for long-term care and other future expenses to keep the bulk of your estate intact for your children.

5.     Facilitating Communication

Estate planning attorneys can foster communication between you and your children about your estate planning decisions. These discussions can help prevent future misunderstandings and conflicts.

Summary

While an estate planning attorney can help ensure your children’s inheritance is organized and distributed effectively, parents also play a key role. Parents must educate their children regarding the value of money, what it can and can’t do for them, and have open conversations about their future inheritance. Including your estate planning attorney in some of the more crucial conversations with your children about their inheritance can be effective. Your attorney can address any questions from a legal standpoint and help the discussion to remain fact-based, keeping emotions to a minimum.

Failing to talk to adult children about their inheritance can leave them unprepared to handle even a modest amount and often results in the money being quickly squandered. Help your children to maintain your legacy and your family’s intergenerational wealth for years to come.

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.

The Simple Things You Can Do To Live Longer

The Simple Things You Can Do To Live Longer

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With advances in medicine, technology, and life science, we are now living longer, on average, than previous generations. But simply living a longer life should not be the goal. Maintaining a healthy quality of life should be. After all, who wants to live a long life filled with sickness and ailments?

The earlier you adopt a healthy lifestyle, the better your chance of living a long, healthy life. Here are some simple things you can do to improve your lifestyle.

Smoking

If you are not a smoker or tobacco user, that’s good. Make sure you don’t become one. Avoid breathing second-hand smoke whenever possible. If you are a smoker, find a way to quit. Try nicotine patches, gum, or hypnotherapy. Figure out what works for you and do it. Breath is life, and keeping your respiratory system healthy increases your lifespan.

Exercise

Exercising for 30 minutes each day is imperative for longevity. The best and easiest daily exercise is walking. If you are out of shape and 30 minutes of exercise every day seems unachievable, then start with 10 minutes. As your stamina improves, increase your exercise time to 20 minutes each day. As you build up to 30 minutes of daily exercise, make sure your pace is moderate to vigorous.

Try making a routine of walking every morning. Walking will help you lose weight and gain muscle. Adding other exercises to your routine, such as swimming and weightlifting, will help you create a well-rounded exercise regimen. Joining a class can be helpful since classes are at set times, which can help you establish a routine. Talk with your doctor before starting a new exercise regimen.

Healthy Diet

We all know that a healthy diet plays a significant role in living a long, healthy life. There are many books and articles about which diet is the best. The best diet for you, though, is a healthy diet you can achieve and maintain. Talking with your doctor will help you choose a healthy diet that works for you.

When shopping for food at your local supermarket, keep in mind that healthier foods are generally found around the outskirts of the store. You will find fresh fruits and vegetables, lean meats, and dairy products there. The inside aisles of supermarkets are stocked with food products, not real food. Most of these food products are so over-processed and full of chemicals that they are unhealthy.

Alcohol

Consuming alcohol in moderate amounts is not considered an unhealthy practice. Moderate amounts of alcohol are described as two drinks per day for men and one drink per day for women. If you habitually consume more than a moderate amount, you should work on reducing your alcohol consumption as soon as possible. If you have not caused too much damage to your liver, it will likely heal itself.

Social Interaction

Studies show that socially interacting with other people, as well as with animals, has health benefits. Being socially active can help stave off such health issues as depression, high blood pressure, cognitive decline, and dementia. Here are some ways to add social interaction into your life:

  • Join a club that is focused on your favorite hobby
  • Take academic, artistic, or exercise classes
  • Stay in regular contact with family and friends
  • Adopt a pet
  • Get involved with your neighborhood or community

Planning for a Longer Life

If you end up living into your 80s, 90s, or beyond, make sure your financial life is healthy too. Talk with a financial adviser and an attorney experienced in estate planning and elder law to ensure you have the necessary funds to live comfortably in your later years.

Our law firm is dedicated to keeping you informed of issues that affect seniors who may be experiencing declining health. We help you and your loved ones prepare for potential long-term medical expenses and the need to transition to in-home care, assisted living care, or nursing home care.

Contact our Ruston, LA office by calling us at (318) 255-1760 today and schedule an appointment to discuss how we can help you with your planning.

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.

A Guide to Wealth Transfer

A Guide to Wealth Transfer

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When one person or entity transfers wealth or assets to another, it is called wealth transfer. The transfer can happen either during one’s lifetime or after one’s death. Wealth transfer strategies refer to the methods used to transfer wealth in the most tax-efficient and effective ways. Below are some popular wealth transfer strategies to consider.

Gifts

Gift giving is a commonly used wealth transfer strategy. It involves giving a gift to someone, which can be in the form of cash, securities, real estate, or personal property. The annual gift tax exclusion allows an individual to give up to a certain amount, tax-free, to any number of recipients. In 2023, the annual exclusion is $17,000. This means that an individual can give up to $17,000 per person per year to as many different people as they wish without incurring any gift tax liability. The annual exclusion amount is subject to change, so check with the IRS before making gifts. (It is important to note that this exclusion applies to federal taxes only– it does NOT apply to transfers made for the intention of qualifying for Medicaid Long-term care benefits.)

Trusts

Trusts are legal entities that can hold and manage assets for the benefit of designated beneficiaries. There are many different types of trusts, including revocable and irrevocable trusts. Revocable trusts allow the creator to retain control of the assets during their lifetime and can be changed or revoked at any time.

Irrevocable trusts, on the other hand, cannot be changed or revoked once they are established. They are often used to protect assets from creditors, reduce estate taxes, and provide for beneficiaries. Irrevocable trusts can be a good option for people who want to qualify for Medicaid benefits and not spend all their assets on long-term care.

Family Limited Partnerships

A Family Limited Partnership (FLP) is a type of partnership that is often used to transfer assets within a family while retaining control over them. An FLP is created by transferring assets, such as real estate, stocks, or businesses, into the partnership. The partnership then issues shares to family members, who become limited partners. The general partner, typically the person who created the partnership, retains control over the assets and manages the partnership.

Charitable Giving

Charitable giving is a popular way to transfer wealth and reduce tax liability. By donating assets to a qualified charitable organization, an individual can receive a tax deduction for the value of the donation. Charitable giving can also be structured through a Charitable Remainder Trust (CRT). This allows an individual to donate assets to a trust and receive an income stream for a specified period. After the trust term ends, the remaining assets are transferred to the designated charitable organization.

Life Insurance

Educating yourself on life insurance can be a useful tool for transferring wealth to future generations. Life insurance policies can provide tax-free benefits to beneficiaries. In addition, it can be used to pay estate taxes or other expenses. Life insurance policies can be set up in a way that allow the policy owner to transfer ownership of the policy to a trust or another individual.

Finding the Right Strategy

There are many different wealth transfer strategies available, each with their own advantages and disadvantages. These strategies can have complex tax implications and legal requirements. So, it is important to work with a professional to ensure that the transfer is done in the most efficient way. Consult with a financial advisor and an estate planning attorney before using any wealth transfer strategy.

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.

Technology in Senior Care

Technology in Senior Care

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It is possible for many aging Americans to live longer and healthier lives in their own homes because of the internet of things and technological advancements such as self-monitoring medical devices, telehealth, and smart homes. Elder law and at-home medical technology uses can intersect in several ways. Whether you are a senior looking to stay in your current home or have an aging parent and want to implement systems that create better safety and communication, an elder law attorney can help you craft a plan.

Strategies

Legal Documents

Elder law attorneys can assist older adults when creating legal documents, such as durable powers of attorney and health care proxies, in an online environment. These and other legal documents are crucial to have in place as they authorize someone to make decisions about the older adult’s medical treatment and the use of at-home medical technology.

Meetings with your estate planning or elder law lawyer and family members can happen virtually, and some states now legally recognize e-signatures. Creating these documents without leaving your home benefits seniors with mobility and transportation issues and protects against exposure to infectious diseases.

Privacy and Security

Elder law attorneys can advise older adults on the privacy and security of their personal information and medical data when using at-home medical technology. Secure network communication protocols will keep hackers from stealing your information and ensure the data integrity of communications with medical professionals and entities.

Medicaid Eligibility

Medicaid, the government health insurance program for low-income individuals, may pay for certain at-home medical technology if it’s deemed medically necessary. An elder law attorney can help older adults navigate the Medicaid eligibility process to ensure they receive all the benefits to which they are entitled.

Telehealth services allow Medicaid to reach more seniors at a lower cost than ever. Whether you’re having issues with eligibility, understanding home health services, or selecting home health providers, an elder law attorney can help you understand your Medicaid options.

Long-term care planning

Elder law attorneys can help older adults plan for future needs of long-term care, including using at-home medical technology to help them age in place and maintain their independence for as long as possible. Incorporating at-home medical technology into long-term care planning may include the following:

  • Monitoring Health – Technology such as wearable devices, remote monitoring systems, and telehealth services can track vital signs and send alerts to caregivers if there are any concerns.
  • Medication Management – Personal emergency response systems (PERS) and smart home devices can ensure that older adults are safe and can call for help if needed.
  • Mobility Aids – Robotic exoskeletons, stairlifts, and smart home devices can help older adults with mobility issues move around their homes and control the environment (locks, lighting, temperature) more easily.
  • Social Engagement – Virtual reality, video conferencing, and social networks can connect older adults with loved ones and socialize with others combating isolation and feelings of loneliness.
  • Care Coordination – Medical technology can connect older adults with care providers and healthcare professionals, such as doctors, nurses, and social workers, to monitor the care and support they receive at home.

At-home medical technology is a more affordable option than expensive institutional care. When planning for long-term care, it’s important to consider how technology can help older adults maintain their independence and quality of life.

Guardianship (Interdictions)

In some cases, older adults may be unable to make decisions about their medical treatment or use of at-home medical technology due to cognitive decline or other health issues. Elder law attorneys can assist in appointing a guardian  called a Curator to make these decisions on behalf of their loved one.

Getting Started

An elder law attorney can help an aging adult, and their family understand what at-home medical technology is available and if government programs will pay for it. Getting seniors to use at-home medical technology can be challenging and generally falls under the direction of the family. There are several strategies to implement to make the process easier:

  1. Keep it simple by starting with the basics. Then gradually introduce more advanced features as your loved one becomes more comfortable with the technology.
  2. Make sure the senior understands the benefits of the technology. Explain how it will help them stay healthy and independent and make their life easier.
  3. Demonstrate how to use the technology. Walk your loved one through the setup and use of each device, making sure they know how to operate it.
  4. Provide your loved one with a user manual or guide for reference.
  5. Schedule regular check-ins with your loved one to see how they’re doing with the technology, answer any questions, and ensure their communications with medical professionals are timely and accurate.
  6. Provide your loved one with technical assistance while visiting, and have them contact you if they experience technical issues. Everyone needs reliable IT support.
  7. Look for local support groups and online communities so your loved one can connect with others using similar technology.
  8. If your loved one is having difficulty understanding or not using the technology, consider hiring a professional to help with device setup, training, and guidance.
  9. Encourage your loved one to engage in a trial period with each new technology and see how they feel about it. If they don’t use or are uncomfortable with that particular technology, there might be better solutions.

Many providers make smart home technology for aging adults. The best options depend on the specific needs and preferences of the older adult. Also, compatibility with existing technology and devices. Technology needs will also change with additional health challenges that invariably occur when aging.

Summary

Elder law attorneys can recommend at-home technology so that an aging adult can safely live at home. Family members must participate in the installation of the technologies to ensure their loved one’s security and privacy. Technology alone is not a solution. A support system, including family, friends, lawyers, and healthcare providers, must coordinate efforts in the senior’s best interest.

Whether you need to plan for future at-home health care or already require care management via remote health monitoring. Consumer health technology can make senior care more patient-centric, personal, and accessible.

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.