Have You Seen this Facebook Post?
There has been a post circulating on facebook which makes certain statements about estate planning and probate, some of which are true and some of which are false. Here is a link to the original post: https://www.facebook.com/photo/?fbid=941093593192986&set=a.113960415906312
Below, I have copied the text of the post and I will address each point from the perspective of Louisiana law since I am licensed in Louisiana and I am a Board Certified Estate Planning and Administration Specialist (Certified by the Louisiana Board of Legal Specialization). Understand that estate and probate law is determined by the state of your residency when you die, and this post was likely made by someone who does not live in Louisiana. Louisiana has some particular laws, and if you reside in Louisiana, Louisiana’s laws will apply to you, not the laws of some other state. The original text is in bold and italics, and my response is below it. So here we go!
Spreading this information for those of you that don’t have your affairs in order. Make sure all bank accounts have direct beneficiaries. The beneficiary need only go to the bank with your death certificate and an ID of their own.
This is partially true. Let’s get certain things straight here. In Louisiana, banks are allowed to permit you to designate a “payee on death”. This is the person or persons to whom the bank is allowed to distribute your bank account balances after you die. But these are not “beneficiaries” in the normal sense of the word. In other words, many bank representatives are promoting these “payable on death” designations as “beneficiary designations” which they claim are a substitute for probate. The persons who are payees upon death are not necessarily the persons entitled to the bank account balance. Confusing? Yes it is! This topic is addressed in my other blog post: What Is a POD Account? A litigation time bomb. But here is a summary of it. In general, by law, your assets are inherited by the people named in your will. If you don’t have a will, your heirs are by default your children (equally), and if you are married, your children still inherit, but what they inherit is subject to a “usufruct” in favor of your spouse (assuming all of your property is community property). In general, these are the people who are legally entitled to your bank account balance no matter what your payable on death designation says. Here is the takeaway: if your “payable on death” designation that you make with the bank conflicts with who is legally entitled to inherit, your estate could wind up in litigation. How do you protect yourself? If you desire that your “payable on death” designation is to have legal effect, then it should mirror your last will and testament (or if you don’t have a last will and testament, then your payable on death designation should mirror the laws of intestacy). In other words, if your Last Will and Testament says one thing and your “payable on death” designation with the bank says something else, this could result in a litigation nightmare and your wishes not being followed. For example, if you have two children, each inheriting one-half of your estate, then you POD designation should reflect that. If, however, your POD designation provides that only one of your children get the account(s), then the child who was not designated will have an incentive to sue the one named. The bottom line is that a POD designation in Louisiana is not a “beneficiary designation.”
– TOD = Transfer On Death deed if you own a home. Completing this document and filing it with your county saves your heirs THOUSANDS. This document allows you to transfer ownership of your home to your designee. All they need to do is take their ID and your death certificate to the county building and the deed is signed over. Doing this will avoid the home having to go through probate.
Completely false. This is Louisiana. We have parishes, not counties, and the reference to “county” stongly suggests that the drafter of the original Facebook post was outside of Louisiana. We do not have “transfer on death” deeds in Louisiana. There is a substitute, however. You can make a gift of your assets to your heirs with a retained “usufruct for life”, which in many ways will have the same effect as a TOD, including obtaining a “step up” in income tax basis of the property upon your death. That is a topic for another blog post. Nevertheless, this is often a poor substitute for a plan. Why? If you have more than one heir, the heirs may fight over the property, or fight over the right to live in it or use it after you pass away. For some families this is not a concern. If all of the children have their own home and everyone agrees to sell the property, then there might not be any issues. But I have seen many instances in which one of the children is on the deed or inherits directly and then after the death of the parent refuses to sell the property so that the other children can obtain their share of the inheritance. This can result in the children suing each other and the property potentially being sold at a sheriff’s sale in a licitatoin lawsuit. A better plan might to to specify that your property be sold by your executor in your probate proceeding, and all of the heirs are distributed their share of the inheritance in cash. With that said, if you only have one heir and that heir is deeded ownership (subject to your usufruct for life), this could be fine and it would avoid probate of this property. The bottom line is DON’T LET THE PROBATE AVOIDANCE TAIL WAG THE DOG OF YOUR ESTATE PLAN. Meet with an attorney to develop a plan, and it may be that a deed with a retained “usufruct for life” will work in your case, but maybe it won’t. Your particular needs should drive your planning.
– Living Will: Allows one to put in writing exactly what you want done in the event you cannot speak for yourself when it comes to healthcare decisions
This is correct, and it is also known as a “Healthcare Directive”. However, more important than a “Living Will” or “Healthcare Directive” is a Medical Power of Attorney (discussed below). Generally, a hospital or physician will not “go to the mat” to “pull the plug” if the person you appoint as your Medical Power of Attorney wants something else done than what you expressed in your Living Will.
– Durable Power of Attorney: Allows one to designate a person to make legal decisions if one is no longer competent to do so.
This is correct, and it is a key estate planning document. Howver, not all Durable Powers of Attorney are created equal. Some are not broad enough to allow your powerholder to engage on your behalf in sophisticated estate planning to protect your assets in the event you are required to go into a nursing home. I have often had clients come to me with a Durable Power of Attorney drafted by another attorney’s office (or through an online form service like “Legalzoom”), and the POA is not broad enough to allow me to engage in the type of sophisticated Medicaid Crisis Planning needed by a client who finds it necessary to go into a nursing home and qualify the client for Medicaid Long Term Care benefits. In those cases, I am required to go through the costly Louisiana “interdiction” process to have a judge render the person judicially incompetent even if the client had a Durable Power of Attorney, which might be essentially defective for Medicaid Crisis Planning.
– Power of Attorney for Healthcare: This document allows one to designate someone to make healthcare decisions for their person.
This is correct, and in my opinion this document is a more important document than a Health Care Directive (or Living Will), because as a practical matter it will trump the Health Care Directive. It allows your powerholder to make medical decisions for you in the event you are alive and cannot make those decisions yourself. Accordingly, it is crucial that you have a candid discussion with your named powerholder about guidelines for your care in the event you are incapacitated. In other words, you might want to tell your powerholder, “remove me from life support if I am on it for 3 days, and there is no improvement, and the doctors say that there is no prospect for improvement.”
– Last Will and Testament: Designates to whom personal belongings will go too.
This is correct. But your Last Will and Testament can be a bit broader than that. Your Last Will and Testament can appoint a person to handle your affairs after you die, known as your “Executor”.
Also, keep in mind that under Louisiana law, there are two forms of wills which are recognized: (1) a statutory will; and (2) an olographic will.
A statutory will (assuming your can read and are not blind) is one that has the following characteristics: (a) it is signed by you at the end of the will and on each page, (b) it is signed before a notary public and two (2) witnesses; and (c) has an “attestation clause” which generally recites facts pertaining to how and on what date the will was signed (in particular, it recites that the witnesses and the notary public swear that you OUT LOUD declared that what you were signing was your Last Will and Testament and you signed each and every page and in front of them). Without this “attestation clause” your will is per se INVALID. Keep in mind that to execute a “statutory will” you will have to hire an attorney or notary public to at least sign the will (even if it is not drafted by the attorney or notary public). A statutory will has a certain advantage in that it does not have to be “proved” in a court of law and is presumed correct as long as the formalities of a statutory will are met.
By contrast, an “olographic will” is a will which is entirely hand-written by you in your own handwritring. It cannot be typed, and it cannot be handwritten by someone else. It also must be signed by you and dated by you in your own handwriting. The advantage of an “olographic will” is that you don’t have to hire an attorney to draft it. The disadvantage is that you didn’t hire an attorney to draft it, and as such, you did your own estate planning. But for people of modest means and who cannot afford an attorney, an “olographic will” can often be the best choice. Another slight disadvantage of an “olographic will” is that in your probate proceeding, you will need the affidavits of two (2) people who swear that they recognize your handwriting and that the Will was written in your handwriting. Obviously, this type of a will can be challenged easier than a “statutory will”.
– Funeral Planning Declaration: allows one to say exactly one’s wishes as far as disposition of the body and the services.
This is a good idea, but it is not essential. You can, if you wish, have a private discussion with your Executor regarding these matters. If this is very important to you and you want your burial wishes to be legally binding, these wishes should be incorporated in your Last Will and Testament. See above for the formalities for a valid Last Will and Testament. If your funeral wishes are not in valid form, they are not necessarily binding, and the judge overseeing your probate case may or may not take these wishes into account.
– If the above documents are done, you can AVOID probate.
COMPLETELY FALSE. Again, I am addressing Louisiana law. It is false becasue in Louisiana “payable on death” designations you make with banks are merely “get out of jail free” cards to banks (they are not beneficiary designation instruments). We do not have Transfer of Death – TOD – designations in Louisiana. Your Last Will and Testament (and if you don’t have one, the intestate laws of Louisiana) will control the fate of your assets in a probate proceeding. Nevertheless, there is a post-death administration procedure in Louisiana called an “Affidavit of Small Succession” that can apply in certain circumstances to avoid probate, but the qualification rules can be narrow. Read about it here: Affidavit of Small Succession in Louisiana. Another way to avoid probate is through the use of a “Living Trust”, which can be a very good way to plan your estate, but which is beyond the scope of this article.
If all the above is not done, you have to open an estate account at the bank. All money that doesn’t have direct beneficiaries goes into this account. You have to have an attorney to open the estate account.
If you die with bank accounts in your name (and if you don’t, you still don’t qualify for the “Affidavit of Small Succession” procedure), your Executor or Administrator will have to open a succession (probate) on your behalf and all of your money will go into this account. It is technically false to state that the “attorney will have to open the account.” This is something that your Executor or Administrator will do after your attorney presents the correct legal documents with the court and the IRS (to obtain a tax identification number for the new account). The only way to avoid probate is (1) to die without assets; (2) have modest enough assets to qualify for the “Affidavit of Small Succession” procedure (and none of those assets are bank accounts); or (3) have consulted with an attorney to adopt a probate avoidance plan which you have put in place before your death.
The attorney also has to publicize your passing in the newspaper or post publication at the county courthouse, to allow anyone to make a claim on your property. – It’s a complete PAIN.
In Louisiana, this does not apply. However, there are certain cases in which publication is necessary to sell succession property which I won’t go into detail about here.
– Make a list of all banks and account numbers, all investment institutions with account numbers, lists of credit cards, utility accounts, etc. Leave clear instructions as to how and when these things are paid. Make sure heirs knows where life insurance policies are located.
This is a VERY good idea, particularly as it relates to life insurance policies. The beneficiaries of your life insurance policies will not even know that there is a policy unless you either tell them or they can go through your records to find out that you had a policy. Often, there is no other way to find out that you had a life insurance policy. It is best to tell them before you die, and better yet to have a folder or letter of instruction indicating where all of your assets are located (including bank accounts, bank boxes, real estate, IRAs, 401(k)s, life insurance policies, burial policies and burial plans, paid-for burial vaults, and copies of registration certificates for all cars, trailers, and boats).
– Make 100% sure SOMEONE knows your Apple ID, bank ID account logins and passwords!
This can be important if your Apple ID is valuable. Many people have purchased many albums through iTunes that are worth in the hundreds or even thousands of dollars. It is less important (and sometimes inadvisable that) they know your bank account ID and passwords. They will get access to these accounts in the probate proceeding. But to this list I would add the passwords and digital vault location of any digital assets such cryptocurrencies (Bitcoin, etc.).
– Make sure you have titles for all vehicles, campers, etc!
This is a good idea, but if your loved ones have a copy of your registration certificate for each auto, trailer and boat, this will suffice. They don’t need the original titles, just a description of the them in the registration certificates.
– MOST IMPORTANTLY!!!! – Talk with those closest to you and make all your wishes KNOWN. Talk to those whom you’ve designated, as well as those close to you whom you did not designate. – Do this to explain why your decisions were made and to avoid any lingering questions or hurt feelings.
This can be a good idea, but often isn’t. If you want to treat all of your children equally, having an open discussion usually does not hurt. However, if you intend to partially or fully disinherit a child, often the worst thing you can to is to have a discussion with the child about why you did what you did. Some people don’t have the strength to “stick to their guns” with their children, and hurt feelings can result even if they do. Often the worst thing you can do is get your heirs involved in your estate planning. I have seen a lot of attempted arm twisting by children. But each case is different and your mileage may vary depending on your family dynamics.
Hope this helps! Hope this lights a spark to encourage all your friends and family to take care of these things to make it easier for those we all leave behind!
My hope is that the above list at least helps you start an important conversation with your loved ones.
More important than having a conversation with loved ones is to have a conversation with a good estate planning attorney who can tailor a plan to your needs, wants and goals. If you have spent a lifetime of acquiring and building wealth, don’t fritter it away with a “do-it-yourself” estate plan. Keep in mind that nothing of what was posted in the original Facebook post addresses incapacity planning, avoiding nursing home poverty, tax planning, asset protection, Louisiana forced heirship, preserving assets for minor children (especially in the case of “blended families”), planning for the care of minor children, special needs planning for children with disabilities, or updating beneficiary designation forms for IRAs, 401(k)s, annuities and life insurance. Do you care about these topics? You should!
BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection. There is no cost or obligation.
If you liked this article, “Have You Seen this Facebook Post?” read also these additional articles: What Shouldn’t Be Put in a Will? and Can Medicine I Take Regularly Raise My Blood Pressure? and Warning Signs an Elderly Parent is Being Scammed and What are the Biggest Retirement Costs Often Overlooked?