The need for “estate planning” is often dismissed by individuals as being a luxury which can only be utilized by the wealthy. However, anyone who owns any property has need for at least some knowledge of estate planning in order to determine who will receive his or her property at the time of death.
The term “estate planning” is not restricted to planning or drafting of wills for individuals who will have a federal estate tax consequence at death. “Estate planning”, when used in its broadest sense, is necessary for the husband and wife who want to leave as much as they can to the surviving spouse for that surviving spouse’s economic well-being and protection. It is also necessary for the young husband and wife who have several children, a home with a mortgage, savings, and life insurance. Estate planning is also necessary for the single individual with no children who desires to distribute his or her property in a manner different from the statutory course. Do not let the term “estate planning” fool you. It applies to each of us in some form or fashion.
There are two fundamental objectives which can lead to successful estate planning. The individual interested in estate planning should provide his or her advisor with all pertinent family, business, and financial information so that the advisor can grasp an accurate picture of the circumstances relating to the individual. Second, the individual should generally understand the nature of the estate plan and how it will work. If these two objectives can be accomplished, then a workable estate plan can result.
Consider the following estate planning scenarios:
1.) What about the young married couple with several small children? The first concern is “who will take care of the children if we both die in an accident?” A will can be used to name a tutor (guardian) who will take custody and care of minor children in the event of the death of both parents. In the same circumstance, testamentary trusts can be created in the will for the management of assets and life insurance proceeds for the children until the children reach a certain age. Without a will and testamentary trust in this situation, the children gain control of the assets at age eighteen (18). Also, the testamentary trust can be used to allow the surviving parent to manage the children’s forced heirship portion and the will can provide for bequests to the surviving parent. “Forced heirship” is an archaic law which survives in Louisiana and which requires parents to leave their children who are under age twenty-four (24) a portion of the parent’s estate. Certain assets such as life insurance, retirement plan accounts and IRAs are not subject to Louisiana’s forced heirship law.
2.) Suppose our married couple is enjoying their retirement years and none of the children are forced heirs. The couple may want to each do a will leaving their assets to each other outright. Without a will the children will inherit the deceased parent’s assets, subject to the surviving parent’s use. With a simple will, the surviving spouse can have complete ownership and control of the assets, as opposed to the use, which could require the children to consent to the sale of assets such as the family home.
3.) If your gross estate exceeds $1.5 million this year ($2 million in 2006-2008), and you are married, you should consider a will in order to at least “defer” federal estate taxes until the death of the surviving spouse and possibly reduce or eliminate estate taxes altogether. Such deferral can be accomplished by outright bequests to the surviving spouse, by the grant of the lifetime use (usufruct) over assets to the surviving spouse, or the use of a marital deduction trust that provides lifetime income to the surviving spouse.
4.) No estate plan is complete without the consideration of a power of attorney and a living will. The power of attorney allows another person, the agent, to handle your affairs, in the event of your incapacity. The agent can be given authority to pay bills, file income tax returns, sell property, make health care decisions and basically perform all other acts provided in the power of attorney. The expensive and time consuming alternative to a power of attorney is the legal process known as “interdiction”. Usually in an interdiction, a family member applies to the court to handle the affairs of an incapacitated person. While the interdiction is usually granted if the court is satisfied that the person’s incapacity is such to render him or her incapable of taking care of their person or property, the process is sometimes embarrassing and costly.
These scenarios all require some degree of estate planning. Also remember that if you have a will, it may need updating because of state and federal law changes, or changes in family circumstances. An “out of date” will can create unintended results.
Estate planning IS for everyone.
Carey J. Messina is one of the founding members of the Kean Miller. He leads the Estate Planning and Probate Group and represents clients in wills, trusts, successions, and federal tax matters. Carey works with individuals and families to establish estate plans, including life insurance trusts. He has extensive experience in buy-ins and sales of interests, succession disputes and family business succession planning, gifting, establishing shareholder agreements, establishing wealth transfer entities, and establishing non-profit entities. Carey is a Certified Public Accountant and is a Board Certified Tax Law Specialist and Board Certified Estate Planning and Administration Specialist by the Louisiana Board of Legal Specialization. He is a Fellow of the American College of Trust and Estate Counsel and is listed in The Best Lawyers in America (Woodward/White) in Estate Planning. Carey Messina and Kevin Curry are located in Kean Miller’s new Bluebonnet office at 5035 Bluebonnet Boulevard, Suite B (between I-10 and Jefferson Highway) in Baton Rouge. Kevin can be reached as 225.382.3484 or firstname.lastname@example.org.