Frequently Asked Questions about Estate Planning

Interdiction is the court process that looks after people who cannot make their own personal, health care or financial decisions. These people fall into two general categories: Minor Children (under age 18 in most states) and Incapacitated Adults. Interdiction proceedings can be expensive and time-consuming. Additionally, the court proceeding and associated documents are all a matter of public record.  At least two attorneys must be employed, and this is what makes it particularly expensive.  It generally can be avoided with a good Power of Attorney.

Probate is the court process that administers and distributes a person’s assets after death to heirs and creditors.  It applies to people who have died without legal arrangements to avoid probate.  The court proceeding and associated documents are all a matter of public record.  All probate assets must be disclosed on a “descriptive list” that is available for public view upon request to the parish Clerk of Court.  Many people choose to avoid probate in order to save money, spare their heirs legal hassle, and keep their personal affairs private.

Community property is the default legal regime applicable to spouses in Louisiana.  Community property includes all property acquired during marriage, except property that is inherited during marriage by a spouse.  The share of community property for each spouse is one-half (1/2), and accordingly, all community property will be split equally upon the death of the first spouse to die.  In contrast, separate property is all property acquired before marriage, and also generally includes property acquired during marriage that is inherited by one of the spouses.  Separate property is 100% owned by the spouse to whom the separate property inures. 

The document a person signs to provide for the orderly disposition of assets after death. Wills do not avoid probate. Wills have no legal authority until the testator dies and the original will is delivered to the District Court in your parish of residence. Still, everyone with minor children needs a will. It is the only way to appoint the new “parent” of an orphaned child. Special testamentary trust provisions in a will can provide for the management and distribution of assets for your heirs. In this case, a trust contained inside of the Will (called a “testamentary trust” becomes effective (and irrevocable) upon death. Additionally, assets can be arranged and coordinated with provisions of the testamentary trusts to avoid death taxes.

A Medical Power of Attorney allows you to give someone legal authority to make your health care decisions when you are unable to do so yourself.  The Medical Power of Attorney should be broad enough so that your representative is able to make broad medical decisions for you, including the types of medical life support measures that would be used including being able to decide whether to have withheld/withdrawn life support if you are in a terminal condition (without reasonable hope of recovery) and you cannot express your wishes yourself.

If you die without even a Will (intestate), the legislature of Louisiana has already determined who will inherit your assets and when they will inherit them. You may not agree with their plan, but roughly 70 percent of Louisiana residents currently use it.  Leaving the disposition of your hard earned assets up to the laws of the state can make for very poor estate planning.

Generally, if you die without a will, your children will inherit your share of community property equally, subject to a “usufruct” to your spouse.  A usufruct means, “use and fruits”.  In other words, your spouse would have the right to the use and the income of your one-half (1/2) share of community property after your death, but cannot control its disposition.  The usufruct does not apply if you do not have a spouse at death.  The usufruct will last until your spouse remarries or dies, at which time your children will inherit the property equally and free of the “usufruct”.   Importantly, if you die intestate (without a will) your spouse has no rights to your separate property.  This is an important consideration for spouses with significant separate property.  Keep in mind that with respect to community property, you only have the right to dispose of your one-half (1/2) share.  Upon the death of the first spouse to die, the surviving spouse owns his or her one-half (1/2) share in his or her own right.

You may avoid probate on the transfer of some assets at your death through the use of beneficiary designations. Examples of assets that often pass pursuant to a beneficiary designation include life insurance death benefits, some annuities, IRAs and 401(k) accounts.  Keep in mind that a bank account that is “payable on death” (POD) is not the same thing no matter what a banker might tell you!  This mistake can lead to unwanted litigation after death if the POD accounts do not correspond to your Will.

A Durable Power of Attorney (called a “Mandate” under Louisina law) allows you to appoint someone you know and trust to make your personal financial decisions even when you cannot. If you are incapacitated without these legal documents, then you and your family will be involved in a legal proceeding known as “interdiction”.  This is the court proceeding where a judge determines who should make these decisions for you under the ongoing supervision of the court.  This court proceeding can usually be avoided if you have a in place a good Power of Attorney.

This is an agreement with three parties: the Settlors (the client who creates the trust), the Trustees (or Trust Managers), and the Trust Beneficiaries. These three (3) hats can be worn by the same people or by different people depending on how your trust is drafted. For example, a husband and wife may name themselves all three parties to create their trust, manage all the assets transferred to the trust, and have full use and enjoyment of all the trust assets as beneficiaries. Further “back-up” managers (successor trustees) can step in under the terms of the trust to manage the assets should the couple become incapacitated or die. Special provisions in the trust also control the management and distribution of assets to heirs in the event of the settlors’ death. Although a Revocable Living Trust has its place in the panoply of estate planning tools, a Revocable Living Trust is generally a poor asset protection choice, because if you can “revoke” your Revocable Living Trust, so can your creditors. Often, it does virtually nothing to qualify you for Medicaid nursing home benefits. Additionally, for a client with a potentially taxable estate, a Revocable Living Trust is usually a poor choice. For such clients, more sophisticated tax planning trusts are available. Married spouses, especially married spouses with children from prior marriages, should be especially keen on when their Revocable Living Trust becomes irrevocable. That is because every Revocable Living Trust, unless it is revoked by the Settlor during life, is intended to become irrevocable at some point (usually the death of one or both of the spouses). There are many stories I can tell you about estate plans centered around a Revocable Living Trust that went wrong due to the fact that the drafting attorney did not clearly specify when and under what conditions the Revocable Living Trust was to become irrevocable. BEWARE!

Whether you are young or old, rich or poor, married or single, if you own titled assets such as a house and want your loved ones to avoid court interference at your death or incapacity, you can consider a Revocable Living Trust. A trust allows you to bring all of your assets together under one plan. However, keep in mind the limitations of a Revocable Living Trust. If you want to protect your assets during life, and also qualify for medicad nursing home benefits, an Irrevocable Living Trust may be a better alternative.

Generally clients who wish to avoid taxes should usually create a different type of irrevocable estate tax planning trust, of which there are many varieties. Also, clients who wish to protect assets in the trust during their lives should also avoid a Revocable Living Trust.