What a Will Can and Cannot Do
Having a will doesn’t avoid probate, the court-directed process of validating a will and confirming the executor. To avoid probate, an estate planning attorney can create trusts and other ways for assets to be transferred directly to heirs before or upon death. Estate planning is guided by the laws of each state, according to the article “Before writing your own will know what wills can, can’t and shouldn’t try to do” from Arkansas Online.
In some states, probate is not expensive or lengthy, while in others it is costly and time-consuming. However, one thing is consistent: when a will is probated, it becomes part of the public record and anyone who wishes to read it, like creditors, ex-spouses, or estranged children, may do so.
One way to bypass probate is to create a revocable living trust and then transfer ownership of real estate, financial accounts, and other assets into the trust. You can also create an irrevocable living trust that will avoid probate, but an irrevocable living trust is typically established for more that just probate avoidance. For both, you can be the trustee, but upon your death, your successor trustee takes charge and distributes assets according to the directions in the trust.
Unfortunately, in Louisiana you cannot retitle assets to be owned jointly to avoid probate, but you can establish it in an equivalent manner and still maintain tax benefits. However, setting up ownership in this fashion can make the property vulnerable to lawsuits, creditors and predators. If the other owner has trouble with creditors or is ending a marriage, the assets may be lost to debt or divorce.
Accounts with beneficiaries, like life insurance and retirement funds bypass probate. The person named as the beneficiary receives assets directly. Just be sure the designated beneficiaries are updated every few years to be current.
Assets titled “Payable on Death” (POD), or “Transfer on Death” (TOD) are deceptive in Louisiana. These assets, it would seem, bypass probate. At least that is what some bankers will tell you. But as I discussed in my other blog post addressing POD accounts specifically, POD accounts can be a lawsuit waiting to happen. Read here: What Is a POD Account? A litigation time bomb.
Some people think they can use their wills to enforce behavior, putting conditions on inheritances, but certain conditions are not legally enforceable. If you required a nephew to marry or divorce before receiving an inheritance, it’s not likely to happen. Someone must also oversee the bequest and decide when the inheritance can be distributed.
However, trusts are much more flexible and can be used to protect assets during your life and after death. Trusts can be used to set conditions on asset distribution. The trust documents are used to establish your wishes for the assets and the trustee is charged with following your directions on when and how much to distribute assets to beneficiaries.
Leaving money to a disabled person who depends on government benefits puts their eligibility for benefits like Supplemental Security Income and Medicaid at risk. An estate planning attorney can create a Special Needs Trust to allow for an inheritance without jeopardizing their services.
Finally, in certain states you can use a will to disinherit a spouse, but it’s not easy. Every state has a way to protect a spouse from being completely disinherited. In Louisiana, a community property state, a spouse has a legal right to half of any property acquired during the marriage, regardless of how the property is titled. Further, the spouse has a right to the “marital portion”. An experienced estate planning attorney can help draft the documents, but depending on your state and circumstances, it may not be possible to completely disinherit a spouse.
Also, in Louisiana, in some situations it may not be possible to even disinherit a child. Here is Louisiana we have something called “forced heirship.” Because forced heirship was scaled back in the 1990s, it is often ignored. But it is ignored at the peril of Louisiana residents. Read my article on forced heirship to learn more: What is Louisiana Forced Heirship?
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.
If you liked this article, “Does Louisiana Have an Inheritance Tax?” read these additional articles: Should I Use a Corporate Trustee? and What Happens If a Trust Is Invalid? and Is Prince’s Estate Settled Yet? and Does Louisiana Have an Inheritance Tax?
Reference: Arkansas Online (Dec. 27, 2021) “Before writing your own will know what wills can, can’t and shouldn’t try to do”