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Tuesday, February 11, 2020

How to Leave Gifts to Step-Children

Today, blended families have become increasingly common, and many individuals have step-children, that is, children of a spouse. In situations where step-children have not been legally adopted, however, they do not have a legal right to an inheritance from a step-parent. For those who wish to leave step-children part of their estate, it is necessary and a must to include them in an estate plan.

The easiest way to leave gifts to step-children is to name them in a will. As with any other gift, they can be given a percentage of the estate, or specific gifts. If there are other children involved, it is important to avoid confusion by naming each child and step-child by using their individual names, rather than terms such as "descendants," "heirs," or "children."

There are also a number of estate planning tools that can be utilized to include step-children in an inheritance. If the objective is to avoid probate, for example, a revocable living trust can be established in which a step-child is named as a beneficiary. Moreover, it may be necessary to provide for a disabled step-child who is eligible for public benefits by establishing a special needs trust. Lastly, a step-child can also be named as a beneficiary in a life insurance policy.

While there is no legal obligation to leave step-children an inheritance, it may be the best choice for those who have a close relationship, or played a significant role, in raising them. However, this will reduce the amount of assets available to other children and beneficiaries. Because blended family relationships are complex and subject to emotional challenges, it is important to explain these decisions with all family members.

And in Louisiana, in particular, close attention must be paid the our laws of Forced Heirship and how  those laws will come into play in your estate plan relative to your children and your step-children.

By engaging in an open and honest dialogue, you can minimize the potential for strife and the possibility of a will contest. In particular, it is important to clarify why you gave each recipient a gift, the selection of your executor, and your thoughts about the family.  Lastly, you are well advised to engage the services of an estate planning attorney who can help ensure your wishes regarding step-children are carried out.

Chip LoCoco

Attorney at Law

Many & LoCoco


Wednesday, January 29, 2020

What is the Medicaid Lookback Period?

Medicaid is a healthcare program jointly operated by the individual states and the federal government. Medicaid is designed to help individuals with limited income and resources pay for healthcare costs including nursing home care, assisted living, or in-home care. However, qualifying for Medicaid can be difficult. While eligibility is state-dependent, there are generally four key requirements: (1) you must be 65 years of age or older, permanently disabled, or otherwise qualify depending on your specific state’s class requirements, (2) you must be a resident of the state in which you are applying, and either a U.S. citizen, permanent resident, or legal alien, (3) your income must be within your state’s income limitations, and (4) your assets must be within your state’s asset limitations.

To help individuals qualify for much-needed Medicaid coverage, multiple strategies exist to reduce one’s income and assets to the state threshold without adversely affecting the individual’s life. These include gifting assets to family and friends, transferring assets to a spouse, and investing in exempt assets (exempt assets are assets that do not count as “assets” for Medicaid purposes – most states allow certain home values to be exempt).

To avoid individuals taking advantage of these strategies at the last minute to qualify, however, the federal government implemented a “lookback period.” This is a period of time for which financial transactions involving the applicant will be reviewed. The purpose of the lookback period is to identify assets, such as money or cars, that may have been gifted or sold below market value in an effort to reduce the applicant’s assets to within the state’s Medicaid asset limitation.

For all states except California, the lookback period is 60 months (5 years). For California, the lookback period is 30 months (2.5 years). The lookback period begins on the day that the individual applies for Medicaid. Thus, when an application is filed, the government will review all financial transactions to look for transactions that violate Medicaid eligibility provisions, such as certain gifts and transfers.

If the reviewing agency identifies transactions within the lookback period that violate the eligibility rules, the applicant will be assessed a penalty. The penalty for violating a transaction during the lookback period is ineligibility for a certain period of time. To calculate the length of the penalty, the government will divide the amount of the transaction in violation by the average monthly or daily private care costs in a nursing home. For example, if an individual gifts $40,000 in a violating transaction during the lookback period and the state’s monthly private care cost for nursing home care is $4,000, then the individual will be assessed a penalty of 10 months of ineligibility. Here, the individual would be assessed a penalty of 10 months to begin from when the individual became eligible for Medicaid.

Given the harsh penalties for violating transactions during the Medicaid lookback period, having proper legal representation can help to ensure that your planning complies with all state and federal law.

Chip LoCoco

Attorney at Law

 


Tuesday, December 17, 2019

Why Shouldn't I use a form from the internet for my will?

In this computer age, when so many tasks are accomplished via the internet -- including banking, shopping, and important business communications -- it may seem logical to turn to the internet when creating a legal document such as a will . Certainly, there are several websites advertising how easy and inexpensive it is to do this. Nonetheless, most of us know that, while the internet can be a wonderful tool, it also contains a tremendous amount of erroneous, misleading, and even dangerous information.

In most cases, as with so many do-it-yourself projects, creating a will most often ends up being a more efficient, less expensive process if you engage the services of a qualified attorney.  Just as most of us are not equipped to do our own plumbing repairs or automotive repairs, most of us do not have the background or experience to create our own legal documents, even with the help of written directions.

Situations that Require an Attorney for Will Creation

Although the use of an attorney for will writing should almost alway be the decision a person should make, in certain cases, the need for an estate planning attorney is inarguable. These include situations in which:

  • Your estate is large enough to make estate planning guidance necessary
  • Minor children or children with special needs and the necessity of a Trust
  • Usufruct and the creation of the rules for the usufructuary
  • You have concerns that someone may contest your will
  • You worry that someone will claim your mind wasn't sound at the signing

Mistakes and Omissions 

It has always been possible to write a will all by yourself, even before the advent of the typewriter, let alone the computer.  In Louisiana, a handwritten will is called an Olographic will. The only requirements for this type of will is that the document needs to be in the handwriting of the testator, dated and signed. Such a document, however, is unlikely to deal with the complexities of modern life.  Many estate planning attorneys have seen, and often been asked to repair, wills that have mistakes or significant omissions. These experts have also become aware of situations in which the survivors of the deceased wind up in court, spending thousands of dollars to contest ambiguously worded or incomplete wills. Without legal guidance from a competent estate planning attorney, creating a "boxtop" will can result in tremendous financial and emotional risk.

Evidence that Online Wills Are Not Foolproof

Evidence that many other complications can arise when an individual creates a will using generalized online directions can be found in the following facts: 

  • Louisiana has its own rules 
  • Forced Heirship needs to be considered
  • Even uncontested wills can remain in probate if not executed in an exacting fashion
  • Estate planning attorneys find legal software programs inadequate
  • Even legal websites themselves recommend bringing in an attorney in all but the very simplest cases
  • Some legal websites provide inexpensive monthly legal consultations with attorneys to protect their client and themselves

Areas that Frequently Cause Problems 

Self-constructed wills often become problematic when the testator:

  • Names an executor who has no financial or legal knowledge
  • Leaves a bequest to a pet  (legally, you must leave the bequest to an appointed caretaker)
  • Puts conditions on payouts to an that are difficult, or impossible, to enforce
  • Makes unusual end-of-life decisions or puts living will information into the will
  • Designates Tutors for children, but neglects to name successor guardians
  • Neglects to coordinate beneficiary designations where, for example, the will and insurance policy designations contradict one another
  • Leaves funeral instructions into the will since the document will most likely not be read until after the funeral has taken place
  • Leaves inexact or ambiguous instructions dealing with blended families
  • Neglects to mention small items in the will which, though of small financial value, are meaningful to loved ones and may cause contention

In order to ensure that you leave your assets in the hands of those you wish, and to avoid leaving your loved ones with bitter disputes and expensive probate costs, it  is always wise to consult with an experienced estate planning attorney when making a will.  In this area, as in so many others, it is best, and safest, to make use of those with expertise in the field.

Chip LoCoco 

Attorney at Law

(504) 483-2332


Thursday, October 31, 2019

Why you should give your Spouse a Power of Attorney.

Married couples will often have legal estate documents prepared together.  Such documents may include a will, leaving all property to the surviving spouse and/or the couple’s children, and a living will to direct the spouse how to handle medical issues if one spouse becomes incapacitated.  However, another estate document may be beneficial for spouses -- a durable power of attorney.  

What is a durable power of attorney?

A durable power of attorney (POA) is a power of attorney given by one spouse to the other and allows the other spouse to handle certain business or monetary activities and/or medical decisions as detailed in the agreement. 

 

While Louisiana law grants spouses certain rights to act for the other spouse, some activities may or may not be covered.  A power of attorney ensures that the other spouse can act without question for the granting spouse. And please keep in mind, that a substitute agent should be named to take over from the other spouse would they become incapacitated or die.

Some examples of business decisions in real estate matters where the well spouse is not a co-owner (perhaps because the real estate was a premarital asset or for other tax reasons) and can act for the incapacitated spouse are:

  • The other spouse can collect rent
  • To pay real estate taxes for properties that may not in both spouses ownership
  • To handle issues related to any mortgages
  • To take out property insurance

Some other general business related functions a durable power of attorney can include: 

  • To sue on the collect of a debt
  • To file for bankruptcy
  • To write checks and do banking transactions
  • To sell stock or other securities
  • To file tax returns
  • To manage retirement accounts
  • To borrow money
  • To make loans
  • To make charitable donations
  • To hire attorneys, accountants or other professionals

The medical power would allow the other spouse to speak to doctors, receive and review medical records, and make medical decisions, which work in conjunction with the Living Will.

Durable means that the Power of Attorney will survive any incapacity of the granting spouse and will continue in full force and effect until death or revocation by that spouse.

So in closing, this is a very brief overview of the importance of a Durable Power of Attorney and the importance to have one even if you are naming the other spouse as the agent. I hear that a lot from people. I don't need a power of attorney - my spouse can act. As we have seen, such a thought means you are relying on all of the laws of Louisiana to determine if the spouse indeed has the right to act. A durable power of attorney signed by the spouse before any disability that would effect their competency, and duly notarized and witnessed for validity) can come in handy in a family emergency and is a smart thing to do.

Chip LoCoco

Attorney at Law

 


Thursday, August 15, 2019

A Living Will or Health Care Power of Attorney? Or Do I Need Both?

Many people are confused by these two important estate planning documents. It’s important to understand the functions of each and ensure you are fully protected by incorporating both of these documents into your overall estate plan.

A “living will,” often called an advance health care directive, is a legal document setting forth your wishes for end-of-life medical care, in the event you are unable to communicate your wishes yourself. The safest way to ensure that your own wishes will determine your future medical care is to execute an advance directive stating what your wishes are. In some states, the advance directive is only operative if you are diagnosed with a terminal condition and life-sustaining treatment merely artificially prolongs the process of dying, or if you are in a persistent vegetative state with no hope of recovery.

A durable power of attorney for health care, also referred to as a healthcare proxy, is a document in which you name another person to serve as your health care agent. This person is authorized to speak on your behalf in order to consent to – or refuse – medical treatment if your doctor determines that you are unable to make those decisions for yourself. A durable power of attorney for health care can be operative at any time you designate, not just when your condition is terminal.

For maximum protection, it is strongly recommended that you have both a living will and a durable power of attorney for health care. The power of attorney affords you flexibility, with an agent who can express your wishes and respond accordingly to any changes in your medical condition. Your agent should base his or her decisions on any written wishes you have provided, as well as familiarity with you. The advance directive is necessary to guide health care providers in the event your agent is unavailable. If your agent’s decisions are ever challenged, the advance directive can also serve as evidence that your agent is acting in good faith and in accordance with your wishes.  

Chip LoCoco

Attorney at Law

504-483-2332


Saturday, July 6, 2019

Reverse Mortgages and Older Americans

Perhaps you’ve seen the catchy commercials for a reverse mortgage stating that many older Americans are struggling to get by because they currently do not have enough in savings and retirement funds to manage their expenses, but yet many have equity in their homes. To solve the financial difficulties, the commercial recommends using a reverse mortgage to access that equity.

 

Suppose you’re one of the many individuals such commercials are targeting. You’re struggling financially but have significant equity in your home – perhaps you paid off your mortgage ten years ago. How exactly does a reverse mortgage help you?

At a basic level, a reverse mortgage is a loan from a bank secured by your house – just like a regular mortgage. The primary difference is that for a reverse mortgage, you receive a lump sum payment or continuous payments from the bank and do not make payments on the principal balance. Whereas in a regular mortgage you take out a loan and then make monthly payments, a reverse mortgage doesn’t require any payments to be made until a specified event occurs, such as your death, the sale of the property, or another event identified in the loan agreement.

What about interest?

Interest still accrues in a reverse mortgage. However, you do not make recurring principle or interest payments. Thus, if you take out a reverse mortgage, your outstanding principal balance will continue to rise as interest accrues.

If interest accrues, what happens if the principal balance exceeds the home’s value?

Federal regulations ensure that the debtor cannot be liable for the difference if the principal balance exceeds the home’s value when repayment is required. When making a reverse mortgage, the bank is taking the risk that the principal balance may exceed the home’s value. There are two reasons that the principal balance can exceed the home’s value. First, the individual may live longer than anticipated and thus interest accrues in excess of the home’s value. Second, a market downturn can cause the home’s value to drop below the principal balance.

What should I do if I’m interested in a reverse mortgage?

The reverse mortgage can be a great option for many older Americans who have significant equity in their homes, but they are complex financial instruments that should be carefully considered. Keep in mind what a reverse mortgage means to your heirs upon death.

Some key points to consider. When the borrower dies, the lender must be repaid. However, if one spouse has died but the surviving spouse is listed as a borrower on the reverse mortgage, he or she can continue to live in the home, and the terms of the loan do not change. With the death of the last spouse, the reverse mortgage needs to be dealt with, and done so quickly. Heirs will need to immediately settle on a course of action. A lender will typically explain options for paying off the loan to the borrower's estate. They heirs can keep the property, sell the property or turn the keys over to the lender. Heirs only have 30 days to decide what to do. That decision is almost always driven by whether there's equity left in the property.

If the heirs decide to not turn the house over to the mortgage company, they have six months to sell the property or pay off the reverse mortgage, possibly with a new mortgage. The heirs will have to pay the full loan balance or 95 percent of the home’s appraised value, whichever is less. Heirs can request up to two 90-day extensions. To get that full year, they must show evidence that they are arranging the financing to keep the house, or they are actively trying to sell the house, such as providing a listing document or sales contract. Insurances must be kept on the home the entire time as well. But your heirs won’t have to pay more than the full loan balance or 95 percent of the home’s appraised value, whichever is less.

If you are considering a reverse mortgage, please make sure you know and fully understand all the requirements that will be place don you and that you can meet those requirements so that the loan does not become due during your lifetime. You should also consider the burden the reverse mortgage will be on your heirs. As for the heirs, upon the death of borrower, being aware of the rules that are in place can keep the heirs from making poor decisions when trying to resolve the issue with the reverse mortgage.

Chip LoCoco

Attorney at Law

Many & LoCoco Law Firm

 


Thursday, May 9, 2019

The Unique Louisiana Law of Forced Heirship


By Vincent B. "Chip" LoCoco, Esq.

 

One legal term I am most often asked to explain is forced heirship. Louisiana is the only state in the union which has forced heirship as a law. Let me reiterate that again.
Read more . . .


Wednesday, April 3, 2019

4 Reasons Everyone Needs an Estate Plan

Many people are under the misconception that estate plans are only necessary for those with substantial wealth. In fact, estate plans are important for everyone who wants to plan for the future. For those unfamiliar with the concept, an estate plan coordinates the distribution of your assets upon your death. But that's not all, as we will see below. There are many reasons that everyone needs an estate plan, but the top reasons are:

1. Protecting You and Your Family

Most people associate an estate plan with death, but an estate plan also comes into play if you become incapacitated. Through a proper estate plan, you can designate who will be responsible for making your financial and medical decisions, the authority they will have, and restrictions you would like placed on their power.

2. Distributing Your Assets as You See Fit

Without an estate plan, your assets will be distributed according to intestacy laws. This may be counter to what your wishes and desires are which could be perfected if you have a will. In addition, not having a will or trust in place lends itself to the potential of disputes between surviving family members. The best way to ensure that your beneficiaries receive the inheritance you intend for them is by having a well-conceived estate plan.

3. Reducing Taxes

Whether married or single, having an estate plan can significantly reduce taxes owed upon the transfer of your assets to your heirs. Without proper planning, any transfers from you to a beneficiary may be subjected to federal taxation. Trusts, one of the most well-known, but least understood, estate planning tools, present  excellent opportunities for reducing taxes associated with inheritance.

Through a system of trusts and transfers, you can reduce the overall tax burden associated with the inheritance. For those with substantial assets, more advanced tax planning strategies will be necessary. Regardless of your current wealth, you will likely be able to reduce the taxation of your estate’s assets with the help of an experienced estate planning attorney.

4. Providing for Your Family as You Believe Best

By combining the ability to distribute assets with other estate planning tools such as trusts, you can include conditions for each recipient. This ensures that the money you want to give your nephew for college will actually be used for college, even if that is still 10 or 15 years away.

As noted, estate planning is for everyone – not just the super-wealthy. Whether it’s avoiding a future family dispute, helping a loved one later in life, or reaching any other goals or objectives, having an estate plan is the best way to protect your interests.

Chip LoCoco


Wednesday, February 20, 2019

An Overview of Retirement Plan Options


Retirement planning is essential given ever-increasing life expectancies in the United States. Unfortunately, many Americans fail to save adequate amounts to make it through retirement. Often, individuals believe that they will be fine on Social Security. However, Social Security is only designed to compensate for 40% of your income; Social Security is designed to be an income supplement rather than a sole income source. To make matters worse, workers tend to overestimate how late into their life they will be able to work.
Read more . . .


Saturday, December 22, 2018

Pre-Printed Will Forms - Don't


This will be a very brief article today, as it's fairly simple to explain.

The State of Louisiana has very specific rules as to the requirements of what makes a document a valid Last Will and Testament. Our rules are different from other parts of the country. For example, the law requires the testator to sign the bottom of each page. Failure to do so will render the will invalid.


Read more . . .


Friday, November 30, 2018

Using Your Will to Dictate How to Pay Off Debts

Most people realize that they can use their last will and testament to set out who should receive particular assets or income. However, few people understand that they can also describe how they would like specific debts paid off in their will as well. Unfortunately, many of your debts do not just disappear when you pass away; they are often passed on to your loved ones to address.

Thankfully, some careful planning and forethought now can help your family and friends deal with these issues much more efficiently in the future, cutting down on confusion and stress.  

Types of Debts You May Leave After You Pass

Generally speaking, there are two types of debt. Which kind you have will affect how you can pay these items after your death.

1. Secured Debt.

Debt that is connected to an object is considered “secured debt.” That is, the debt is attached to some object or real property. The most common examples of these types of debts are a mortgage or a car payment. If you do not pay these debts, you could lose whatever property is associated with the debt.

2.  Unsecured Debt.

Unsecured debt is much more fluid. It is not associated with any particular object, even if you used credit to purchase the object. Credit card obligations and medical bills are two of the most common unsecured debts.

Leaving Loved Ones Property (and Debt!)

If you leave a loved one an object that is connected to debt, then that debt will also move with the property. For example, if you bequest your loved one your house, but you still owe $30,000 on your home, then your loved one has not only gained a house, but he or she now has a $30,000 debt as well.

Many people overlook these debt obligations when they craft their will or trust documents. Failing to account for how that debt will be repaid can put unnecessary strain on your loved ones if you fail to plan properly.

You can explicitly state whether you want your loved one to take on the debt in your will. Otherwise, your loved one may simply sell whatever property you have provided to obtain the equity from it, instead of taking on your debt obligation.

Setting Out How Debts Will be Paid

You can state how you would like debt to be paid in your will. Generally, your debts must be paid before your executor can make a payment to beneficiaries. However, you can state, for example, that you would like a specific bank account to be used first to pay debts. You may also indicate which particular property you would like sold to pay debts, instead of having that property pass on to your heirs. You can get creative with how you want to address your debt obligations.

No matter what you do, it is crucial that you do something. Sticking your loved ones with debt or using your entire estate to pay debts is not practical or beneficial for anyone. Your estate planning attorney can help you craft a plan that will work for your particular situation.

Chip LoCoco

New Orleans Estate Planning Attorney

 


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The Attorneys of Many & LoCoco assist clients throughout parts of Southern Louisiana, including but not limited to New Orleans, Metairie, Mandeville, Convington, Gretna, Arabi, Marrero, Westwego, Harvey, Chalmette, Kenner, and the Parishes of Orleans, Jefferson, St. Tammany, and St. Bernard, LA.



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