What is estate planning?
When someone passes away, his or her property must somehow pass to another person. In the United States, any competent adult has the right to choose the manner in which his or her assets are distributed after his or her passing. A proper estate plan involves strategies to minimize potential estate taxes and settlement costs as well as to coordinate what happens with your home, your investments, your business, your life insurance, your employee benefits (such as a 401K plan), and other property in the event of death or disability. On the personal side, a good estate plan should also include directions for carrying out your wishes regarding health care matters, so that if you are ever unable to give the directions yourself, someone you know and trust can do that for you.
Why is it important to establish an estate plan?
2 reasons why it is imperative to have an estate plan:
1. If you do not establish an estate plan, then, Louisiana's default, intestacy law will provide an inheritance plan for you. However, it may not match your intentions. Our succession laws are ultimately determined by whether you have separate or community property, and if you have children. For example, with separate property, intestacy law does not provide your spouse with priority for inheritance. Instead, the spouse is 3rd in line behind children and then siblings. And, with community property, your surviving spouse does not inherit your former one-half interest of the property. Instead, your children inherit, and then, the spouse receives only a legal usufruct over that one-half interest.
Of course, with an estate plan, you can change these priorities, grant greater rights to a surviving spouse, include non-blood relatives, and make sure that children are appropriately cared for by the correctly appointed Guardians.
2. While estate planning largely encompasses planning for the transfer of your assets upon passing, planning for potential incapacity due to an accident or illness is no less important. In fact, complications from becoming incapacitated can result in your loved ones litigating who should be in charge of healthcare and financial decisions. That occurs with a guardianship proceeding, which is a formal, court process that can be expensive. And, thereafter, the appointed Guardian must make annual, formal accountings. However, a proper estate plan includes your appointment of the proper Agents to carry out your healthcare and financial decisions, if incapacity occurred.
What does my estate include?
Your estate is simply everything that you own (and any related debts) including:
- Your home or any other real estate ownership interest;
- Your business or business interests;
- Your share of any joint accounts;
- The full value of your retirement accounts;
- Any life insurance policies that you own (versus life insurance owned by other entities or a life insurance trust); and
- Any property owned by a trust, over which you have a significant control.
Online Wills are available. Why do I need a professional to assist me with my Estate Planning?
While an online Will may, at first, appear to be the most simple and affordable route to establishing your estate plan, we see many clients that attempt to first go the online route, but, they do not actually understand all the questions asked of them or all the end, legal terms included in their Last Will. Thus, making a simple error on the front end with drafting your estate plan could result in much more complex and costly problems at your passing. For example, an estate planning client should understand a usufruct interest v. full ownership, an Executor v. an Agent appointment, and if a Testamentary Trust is needed, and if so, what terms should be included with the Trust. Without the back and forth dialogue with a professional, much, if not all of these terms get lost. Further, we have met with many clients that come to us for a succession, after a loved one, or spouse passes, and they are completely surprised as to usufruct and trust provisions in their Wills, for which they did not intend to include.
In addition, Louisiana appellate courts strictly adhere to form requirements for Last Wills. Many times, online forms do not align with our form requirements. Or, an uninvolved notary may not take all the necessary steps to insure proper execution of a Last Will under our Civil Code, and case law requirements. Such errors could result in nullifying the entire Last Will.
But, more importantly, for you, the client, an online format is likely not going to get a full picture of 1) your primary and secondary concerns, 2) the extent of your probate and non-probate assets and your intended beneficiaries, 3) if you have out of state property, 4) coordination of the beneficiary designations and drafting to deter fiduciary litigation as best as possible and upon considering your family dynamic, and 5) other concerns as to whether business planning, disability and incompetency planning, or charitable gifting should also be addressed.
How do I name a guardian for my children?
If you have children under the age of eighteen, you should designate a person or persons to be appointed guardian(s) over their person and property. Of course, if a surviving parent lives with the minor children (and has custody over them) he or she automatically continues to remain their sole guardian. This is true despite the fact that others may be named as the guardian in your estate planning documents. You should name at least one alternate guardian in case the primary guardian cannot serve or is not appointed by the court.
What estate planning documents should I have?
A comprehensive estate plan should include certain legal documents prepared by an attorney based upon in-depth counseling that takes into account your particular family and financial situation including:
A Last Will and Testament. This document is designed to transfer your assets according to your wishes. A Will also typically names someone to be your Executor, the person designated to carry out your instructions if probate is required. If you have minor children, you should also name a Guardian and an alternate Guardian. A Will only becomes effective upon death.
A Durable Power of Attorney for Property. This document permits you to carry on your financial affairs in the event that you become disabled or have an extended absence. Unless you have a properly drafted power of attorney, it may be necessary to apply to a court to have a guardian or conservator appointed to make decisions for you during a period of incapacitation. This guardianship process is time-consuming, expensive, emotionally draining and often costs thousands of dollars.
There are generally two types of durable powers of attorney: a present durable power of attorney in which the power is immediately transferred to your agent (also known as your attorney in fact); and a springing or future durable power of attorney that only comes into effect upon your subsequent disability as determined by your doctor. Anyone can be designated, most commonly your spouse or domestic partner, a trusted family member, or friend. Appointing a power of attorney assures that your wishes are carried out exactly as you want them, allows you to decide who will make decisions for you, and is effective immediately upon subsequent disability.
The law allows you to appoint someone you trust to decide about medical treatment options if you lose the ability to decide for yourself. You can do this by using a Durable Power of Attorney for Health Care or Health Care Proxy where you designate the person or persons to make such decisions on your behalf. You can allow your health care agent to decide about all health care or only about certain treatments. You may also give your agent instructions that he or she has to follow. Your agent can then ensure that health care professionals follow your wishes. Hospitals, doctors and other health care providers must follow your agent's decisions as if they were your own.
A Living Will informs others of your preferred medical treatment should you become permanently unconscious, terminally ill, or otherwise unable to make or communicate decisions regarding treatment. In conjunction with other estate planning tools, it can bring peace of mind and security while avoiding unnecessary expense and delay in the event of future incapacity.