Legal Corner: What’s the difference between a succession and an estate plan?

Updated: Mar. 20, 2019 at 11:35 AM CDT
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Question: “I am trying to make a decision about the future of my aging parents, but I am so confused. What is the difference between a succession and an estate plan?”

Answer: The succession is the legal process of transferring assets to the heirs after death. Sometimes there is a will and many times there is not. The estate plan is putting in place a plan to protect all of your property and other assets and distribute them long term to those whom you desire to receive them. As a part of your estate plan you should include your will, but also powers of attorney, living will and other important documents. See the answer on the website or visit our office for more details.

THE LAW: Succession is the transmission of the estate of the deceased to his successors. The successors thus have the right to take possession of the estate of the deceased after complying with applicable provisions of law. (CCA Art. 871) An estate plan involves making a plan in advance and naming whom you want to receive the things you own after you die. However, good estate planning is much more than that. It should also: Here is a simple list of the most important estate planning issues to consider.

1. Make a will. In a will, you state who you want to inherit your property and name a guardian to care for your young children should something happen to you and the other parent.

2. Consider a trust. If you hold your property in a living trust, your survivors won't have to go through probate court, a time-consuming and expensive process.

3. Make health care directives.

Writing out your wishes for health care can protect you if you become unable to make medical decisions for yourself. Health care directives include a health care declaration ("living will") and a power of attorney for health care, which gives someone you choose the power to make decisions if you can't. (In some states, these documents are combined into one, called an advance health care directive.)

4. Make a financial power of attorney. With a durable power of attorney for finances, you can give a trusted person authority to handle your finances and property if you become incapacitated and unable to handle your own affairs. The person you name to handle your finances is called your agent or attorney-in-fact (but doesn't have to be an attorney).

5. Protect your children's property. You should name an adult to manage any money and property your minor children may inherit from you. This can be the same person as the personal guardian you name in your will.

6. File beneficiary forms.

Naming a beneficiary for bank accounts and retirement plans makes the account automatically "payable on death" to your beneficiary and allows the funds to skip the probate process. Likewise, in almost all states, you can register your stocks, bonds, or brokerage accounts to transfer to your beneficiary upon your death.

7. Consider life insurance.

If you have young children or own a house, or you may owe significant debts or estate tax when you die, life insurance may be a good idea.

8. Understand estate taxes. Most estates -- more than 99.7% -- won't owe federal estate taxes. For deaths in 2017, the federal government will impose estate tax at your death only if your taxable estate is worth more than $5.49 million. (This exemption amount rises each year to adjust for inflation.) Also, married couples can transfer up to twice the exempt amount tax-free, and all assets left to a spouse (as long as the spouse is a U.S. citizen) or tax-exempt charity are exempt from the tax.

9. Cover funeral expenses. Rather than a funeral prepayment plan, which may be unreliable, you can set up a payable-on-death account at your bank and deposit funds into it to pay for your funeral and related expenses.

10. Make final arrangements. Make your end-of-life wishes known regarding organ and body donation and disposition of your body -- burial or cremation.

11. Protect your business. If you're the sole owner of a business, you should have a succession plan. If you own a business with others, you should have a buyout agreement.

12. Store your documents.

Your attorney-in-fact and/or your executor (the person you choose in your will to administer your property after you die) may need access to the following documents:

* will

* trusts

* insurance policies

* real estate deeds

* certificates for stocks, bonds, annuities

* information on bank accounts, mutual funds, and safe deposit boxes

* information on retirement plans, 401(k) accounts, or IRAs

* information on debts: credit cards, mortgages and loans, utilities, and unpaid taxes

* information on funeral prepayment plans, and any final arrangements instructions you have made. Keeping your documents organized will be a great help to your survivors.

QUESTION: “If I do have a will, is there anything more I need to do to pass all my property to my family when I pass?”

ANSWER: Not necessarily. However, with a will, your heirs will have to open a succession when you pass in order to receive the things you have given them. When you place your property in a trust, your spouse and children will not have to open a succession, which will avoid costly legal fees for the heirs. A trust, as the term is used in the law, is the relationship resulting from the transfer of title to property to a person to be administered by him as a caretaker for the benefit of another. A trust or the terms in a trust may be made subject to any condition not forbidden in the law and not against public order or good morals. This simply means that you you are in total control of who receives what, when and how much. There are several different kinds of trusts, and it is best to talk with an Attorney for guidance.

THE LAW: RS 9:1721 et seq. CODE TITLE II--OF DONATIONS INTER VIVOS (BETWEEN LIVING PERSONS) AND MORTIS CAUSA (IN PROSPECT OF DEATH) Living trusts tend to come in two basic flavors: revocable and irrevocable. Most clients will instinctively favor the revocable version. After all, why should they want to put their money into something they can never change, when they could put it into something they retain control over — and can even cancel altogether — instead? What Is an Irrevocable Trust? First of all, it’s exactly what it says: it’s a trust that can’t be modified, amended or terminated without the beneficiary’s permission. After transferring assets into the trust, the grantor can not change the written terms after it’s been executed, thus removing all of his rights of ownership to those listed assets. Why Choose an Irrevocable Trust? Obviously, there must be good reasons to opt for the irrevocable variety. Not being able to revoke the trust is part of a trade-off that comes with several other benefits. The simplest difference between the two is that assets remain in the grantor’s estate in a revocable trust but move out of the estate in an irrevocable trust. The primary reasoning behind the irrevocable trust is that there are many good reasons for clients to want to move assets out of their estate. Here are some simple ways to explain to your clients what they’re gaining by going with the irrevocable trust: Asset Protection In a revocable trust, the grantor maintains ownership of the assets, so there’s always the potential to lose them to creditors or lawsuits. An irrevocable trust moves those assets out of the trustmaker’s hands, and the grantor is no longer considered to own them. An independent trustee makes all the decisions regarding investments on behalf of all the trustees, which may or may not include the grantor. Avoiding Capital Gains Taxes There are ways to move assets into the irrevocable trust in such a way that they won’t incur capital gains taxes. That’s not possible with a revocable trust. Keep in mind, though, that transferring assets through an irrevocable trust may result in gift taxes being owed. (Check out potential tax changes that could effect trusts in the 2017 tax reform bill.)Avoiding Estate Taxes The assets in a revocable trust remain in the grantor’s estate, so if they’re close to qualifying for the federal estate tax, those assets could easily push them over the limit. With an irrevocable trust, those assets are no longer part of the grantor’s estate. Charitable Giving If assets are put into an irrevocable charitable trust while the grantor is still alive, the trustmaker can take a charitable income tax deduction for those assets. If the initial transfer of assets into such a trust doesn’t take place until after the trust maker’s death, the estate will receive a charitable estate tax deduction. Protecting Assets From Nursing Homes One important concern to keep in mind with a revocable trust is that those assets are still exposed to nursing homes. If a client ends up needing long-term nursing care, the money in a revocable trust that was intended to be left as part of an estate can be used for those bills instead. At the same time, some people end up being too clever by half by pushing assets into an irrevocable trust, thinking they will be safe there, and nursing homes or other long-term-care facilities won’t be able to touch that money. Too many people end up needing the assets they’ve given to an irrevocable trust — and can’t get them back because the owners of the trust have died, or are going through a difficult divorce, or otherwise can’t afford to sacrifice those assets for the original trust maker.What Is a Revocable Trust? A revocable trust is literally the opposite of an irrevocable trust, in that the provisions can be altered or canceled by the grantor. During the life of the trust, income earned is distributed to the grantor, and only after death do assets transfer to the beneficiaries. (Check out potential tax changes that could effect these trusts in the 2017 tax reform bill.)Benefits of a Revocable Trust So what benefits does a revocable trust have, aside from the obvious one that the grantor can revoke it? Many grantors create a revocable trust to avoid probate, which it certainly does, but an irrevocable trust accomplishes that as well. A revocable trust specifically works well for a client who doesn’t have serious tax issues, but wants to maintain control of his or her assets. But there’s one other scenario in which they can make a lot of sense: for a client who fears he or she will eventually be mentally incapacitated, whether that’s because of family history or for some other reason. If the grantor of a revocable trust becomes incapable of managing his or her affairs, the designated trustee steps in to handle the assets. The trust can even set forth specific steps and guidelines that the successor trustee must carry out. That, then, might be the ideal candidate for a revocable trust: a client who wants to maintain control over his or her assets, right up until the moment he or she can no longer mentally handle the job, at which point a designated trustee is ready to step in. In most other instances, the irrevocable trust makes more long-term financial sense.

QUESTION: “My 30 year old sister is in a coma after a devastating vehicle accident. She is not married and does not have children. Where do we start with trying to handle her affairs?”

ANSWER: Perhaps you should consider filing for an interdiction. An interdiction is a legal process where a court is asked to determine, from testimony and other evidence presented, whether a person is unable, due to an infirmity, to consistently make decisions regarding his person and/or his property, or to communicate those decisions. If such a finding is made, the court appoints someone to make these decisions for her. There are different kinds of interdictions. A full interdiction is done when the person does not have the capacity to enter into or sign a contract. A limited interdiction is done when the person lacks capacity to make a legal action pertaining to the property but may be able to take care of personal needs.

THE LAW: RS 13:4251.101 et seq. and LA C.C.Art. 362 et seq. Persons subject to

interdiction. Persons subject to mental or physical illness or disability, whether of a temporary or

permanent nature, of such a degree as to render them subject to interdiction, under the provisions of Title IX hereof, remain subject to interdiction as provided in Articles 389 to 399, inclusive, and such other laws as may relate thereto. R.S. 13§4251.102. Definitions:

(1) "Adult" means an individual who has attained eighteen years of age or who is an emancipated minor.

(2) "Conservator" means a person appointed by the court to administer the property of an adult, including a person appointed as a curator in a full interdiction; as a curator in a limited interdiction, but only insofar as the curator is given power over the care of some or all of the property of the interdict; or as a tutor in a continuing tutorship.

(3) "Guardian" means a person appointed by the court to make decisions regarding the person of an adult, including a person appointed as a curator in a full interdiction; as a curator in a limited interdiction, provided that, and only insofar as, the curator is given power over the care of some or all aspects of the person of the interdict; or as a tutor in a continuing tutorship.

(4) "Guardianship order" means an order appointing a guardian.

(5) "Guardianship proceeding" means a judicial proceeding in which an order for the appointment of a guardian is sought or has been issued.

(6) "Incapacitated person" means an adult for whom a guardian has been appointed.

(7) "Party" means the respondent, petitioner, guardian, conservator, or any other person allowed by the court to participate in a guardianship or protective proceeding.

(8) "Person", except in the term incapacitated person or protected person, means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, public corporation, government or governmental subdivision, agency or instrumentality, or any other legal or commercial entity.

(9) "Protected person" means an adult for whom a protective order has been issued.

(10) "Protective order" means an order, issued by a court of another state pursuant to the law of that other state, appointing a conservator or relating to management of an adult's property.

(11) "Protective proceeding" means a judicial proceeding in which a protective order is sought or has been issued.

(12) "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(13) "Respondent" means an adult for whom a protective order or the appointment of a guardian is sought.

(14) "State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, a federally recognized Indian tribe, or any territory or insular possession subject to the jurisdiction of the United States.

Disclaimer: The information furnished in this answer is general and may not apply to some situations. All legal situations are unique. No one should rely to their detriment on these answers. Anyone with a potential legal problem should seek the advice of a licensed attorney before taking any action or inaction. The answers provided are not intended to be specific legal advice and no attorney-client relationship is created between the SWLA Law Center and the viewers of KPLC-TV.

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