Creating a legal structure for family members and other loved ones to be taken care of after a person’s death is one of the best ways to create peace of mind for a parent or spouse. Despite this fact, many people neglect to create a comprehensive plan for their future. An estate plan provides a blueprint for how a person’s assets will be distributed after they pass away, ensures that their loved ones are taken care of, and preserves their legacy.
Estate planning is a process that enables individuals to prepare a plan for the distribution of their assets after their passing. This includes appointing guardians for minor children, determining who will inherit property and making provisions for end-of-life care. Estate planning is not exclusive to the wealthy, but is necessary for anyone with assets and loved ones. With proper guidance and resources, anyone can create a plan to protect their loved ones and assets for years to come.
The absence of an estate plan poses a significant risk to assets and loved ones. In the event of not having a plan, assets may be distributed in a way that is not in accordance with the individual’s wishes, and the distribution may lead to legal disputes among family members. If an individual has minor children, the court may appoint a guardian without their input. A lack of planning can also lead to additional taxes, fees, and delays in asset distribution.
A comprehensive estate plan comprises several key components, which ensure that an individual’s assets and loved ones are protected in the future. These components include a will, a living trust, a durable power of attorney, and advance healthcare directives. A will outlines how an individual’s assets will be distributed after their death and designates guardians for minor children. A living trust allows assets to be transferred to beneficiaries without the need for probate. A durable power of attorney allows someone to make financial decisions on an individual’s behalf if they become incapacitated. Advance healthcare directives allow individuals to specify their wishes for medical care if they are unable to communicate.
Estate planning is a complex process that requires careful consideration and attention to detail. Unfortunately, even the most well-intentioned individuals can make mistakes that can have serious consequences. Some common estate planning mistakes include failing to update beneficiary designations, not accounting for tax implications, forgetting to include digital assets, and failing to plan for disability or incapacity.
For example, Louisiana has an estate tax exclusion. As of 2022, an individual can leave up to $12,060,000 of property to their heirs without paying federal estate tax. This exclusion is indexed for inflation each year. However, it is scheduled to be reduced by about half on January 1, 2026, unless the higher exclusion is extended. It is important to note that state estate taxes may also apply depending on the state in which an individual resides or owns property. In Louisiana, there is no state estate tax. Therefore, an individual who resides in Louisiana and owns property in other states or countries will still be subject to the federal estate tax if their estate is valued over the exclusion amount.
Louisiana is the only state that allows use of a usufruct to achieve estate planning. A usufruct is a unique legal concept that provides the right to use and enjoy property, subject to the usufruct, without owning it. This legal concept can be used in estate planning to allow surviving spouses to have rights to use and enjoy property of their deceased spouse until their death while ensuring that ownership of the property passes to the children.
Suppose a husband passes away, leaving behind a house classified as community property to his wife and children, who hold naked ownership. His wife is granted usufruct over half of the house, but before she can sell it, she must obtain the children’s consent. Sale proceeds can either be divided between the wife and children or, alternatively, the wife’s usufruct can be attached to the proceeds, which sets an amount of money owed to the children at the end of her usufruct.
The usufruct concept can also be used to ensure that children eventually receive their inheritance. For instance, spouses can leave each other an unsuitable interest for life over their estate with naked ownership of the property passing to their children. If their children are minors, naked ownership is placed in trust until they are of a more mature age.
Creating an estate plan is an important step in ensuring that an individual’s assets and loved ones are protected in the future. However, it’s equally important to regularly update the estate plan as circumstances change. Failing to update an estate plan can lead to unintended consequences, such as assets being distributed in a way that is no longer in line with the individual’s wishes. Changes in family circumstances, such as births, deaths, and marriages, may also require updates to the estate plan. Additionally, changes in tax laws may affect an individual’s estate plan.
Estate planning can become more complex when dealing with unique situations such as blended families, special needs, and high net worth individuals. It’s important to address these situations in estate planning to ensure that an individual’s wishes are carried out and their loved ones are taken care of. For blended families, estate planning can involve creating trusts to provide for children from previous marriages. Special needs planning may require setting up a special needs trust to ensure that the individual’s needs are met without jeopardizing government benefits. High net worth individuals may need to consider advanced estate planning strategies to minimize taxes.
Additionally, many people make the mistake of not involving an experienced estate planning attorney. Our team at Charbonnet Law will guide you through the estate planning process to protect your assets and your family’s future. Contact us and call (504) 294-5118 today for a free consultation.