The goal for the Inflation Reduction Act of 2022 (IRA 2022) is to slow inflation, a great benefit to low-income seniors and those living on a fixed income, says a recent article titled “How the Inflation Reduction Act Impacts Retirees” from U.S. News & World Report. But there’s more for seniors.

The bill will help tackle health care costs for seniors, which have skyrocketed in recent years. So many of these provisions don’t go into effect for a few years, but something in the near future is better than nothing.

Other eventual benefits to seniors:

• Medicare may negotiate the prices on prescription drugs
• A cap on out-of-pocket costs for Medicare enrollees at $2,000
• A dramatic cost-reduction on co-pays for insulin for Medicare recipients
• No cost vaccines for Medicare Part D beneficiaries

Under current law, Medicare is banned from negotiating drug prices and is forced to pay market prices. When this law goes into effect, Medicare will be able to negotiate with the pharmaceutical companies and some drug prices should drop.

One caveat: the negotiated prices will be phased in over time. Pharmaceutical companies have a strong presence in Washington. Powerful lobbyists weren’t giving the store away. In 2026, Medicare may negotiate the price for the 10 most expensive drugs, in 2027, the 15 most expensive drugs and in 2029, the 20 most expensive drugs.

Some drugs have put severe cost pressures on Medicare Part D, so the government’s ability to negotiate prices will be impactful.

Rising health care and prescription prices are especially challenging to retirees living on a fixed income. Another big benefit of the new law is limiting the out-of-pocket responsibility to retirees for prescription drugs. However, it will be three years before this goes into effect, starting in 2025.

This aspect of the bill will be especially beneficial to Medicare Part D beneficiaries who take expensive drugs for cancer or multiple sclerosis. According to the Kaiser Family Foundation, an estimated 1.4 million Medicare Part D enrollees spend well over $2,000 in out-of-pocket costs for prescription drugs in 2020.

No-cost vaccines will be a boon to retirees, who will be able to get the shingles vaccine, the annual flu shot and other vaccines at no cost.

Enactment of the provisions is still several years away, but the future looks brighter for Medicare beneficiaries, a good thing in the face of inflation and rising costs for everything from apples to zucchini.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “Inflation Reduction Act Puts Prescription Drug Relief in Sight for Seniors” read also these additional articles: Ask Mom if She has a Will and What Should I Know About Long-Term Care? and What Do Seniors Say About Aging in Place? and The Difference between Revocable and Irrevocable Trust

Reference: U.S. News & World Report (Sep. 15, 2022) “How the Inflation Reduction Act Impacts Retirees”

The family was baffled. Not only was the will out of date, but it was also unsigned and the person named as executor had died a decade before their mother died. Grandchildren born after the will was created were not mentioned and personal possessions left to some people in the will had been given away years ago.

This scenario, as described in the article “Mom, Do You Have a Will?” from Next Avenue, is not unusual because many older adults and their children are equally reticent to discuss death. It’s a hard topic to address, but without these conversations, how can you make sure the transition after they pass is smooth?

Who needs a will? Pretty much everyone does. If your parents don’t have a will, here are some talking points to remind them of why it matters:

• If you are part of a blended family, estate planning avoids either a full or partial disinheritance of a surviving spouse or their children.
• If there are minor children or adult children with special needs, a will is used to appoint guardians. With no will, the court makes decisions about who raises children or cares for a special needs individual.
• If yours is a fighting family (you know who you are), and if you want certain things to go to certain people, there needs to be an updated will.

Single people need a plan for their assets, especially if they are in a committed relationship but not married. Louisiana inheritance law makes no provision for a domestic partner. If a relationship is recognized before a loved one dies the remaining partner can access their right to property or benefits.

When someone dies without a will or a living trust, known as intestate succession, assets may be distributed according to rules set out in state law, which vary state to state and may not be what they would have wanted.

When asked if there is a will, some may say they are prepared. However, as in the example, this may or may not be true. Their will may be old, no longer relevant to their situation or may not have been signed.

Clarifying the status of an older adult’s will is important to a smoother transition of assets and needs to be addressed when they are of sound mind and able to make their own decision about their estates.

When preparing to have a discussion with someone who is active and healthy, the conversation is easier. Ask if they have a will and what their wishes are after they have passed. You can explain how these steps are essential to creating their legacy and protect their family from estate taxes and expensive court oversight.

When a person is seriously ill, this is admittedly a harder conversation. Acknowledge the difficulty and let them know they can stop the discussion if necessary. It may take more than a few conversations to get to everything. Discuss these issues with respect and empathy. Offer ideas and options and steer clear of any ultimatums.

Talk with an estate planning attorney who will explain what you need for your specific family. Find someone who focuses on estate planning and not six other areas of the law. They will have seen this situation before and will know how to manage both the law and the people. Find someone who doesn’t see this as a one-time fill-in-the blanks transaction, but as a relationship based on trust.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “Ask Mom if She has a Will” read also these additional articles: What Should I Know About Long-Term Care? and What Do Seniors Say About Aging in Place? and The Difference between Revocable and Irrevocable Trust and What Is Asset Protection Planning?

Reference: Next Avenue (Sep. 14, 2022) “Mom, Do You Have a Will?”

Long-term care insurance is a specialty type of insurance that helps pay for costs that are typically connected with long-term care. This can include items such as care given in a hospital, nursing home services, medical services provided in your home and treatment for dementia.

WGN’s recent article entitled “10 Crucial Things to Know about Long-Term Care“ looks at these important items.

1. The Biggest Financial Threat. The most significant threat to your financial nest egg is long-term care. About 70% of people over 65 will need some kind of long-term care during their life. The national average for home health care services is $16,743 per month. However, there are ways to manage this without buying a traditional long-term care insurance policy where “you use it or lose it.”
2. Long-Term Care Insurance is Really “Lifestyle” Insurance. It’s NOT nursing home insurance.
3. Reverse Mortgages. These have become a popular and accepted way of paying for expenses, including the cost of long-term care. Reverse mortgages are designed to keep seniors at home longer. A reverse mortgage can pay for in-home care, home repair, home modification and other needs.
4. Using Medicaid to Pay For Long-Term Care. This should be a last resort to pay for long-term care, but it also may be the only way to protect family assets. Medicaid will pay for long-term care, but certain criteria must be satisfied. If you have too many assets, you may not qualify. Talk to an elder law attorney to get qualified amd before applying for Medicaid.
5. Important Considerations When Selecting a Long-Term Care Plan. Four things to consider: (i) go with a company with an AM BEST rating of A+ or better; (ii) the assets of the insurance company should be in the billions; (iii) some long-term care insurers will allow for group discounts through employers, or “affinity” group discounts through a local organization; and (iv) the tax advantages for tax-qualified long-term care insurance plans. At the federal level, premiums for long-term care insurance fall into the “medical expense” category. On the state level, 26 states offer some form of deduction or tax credit for long-term care insurance premiums.
6. The Annuity-Based Long-Term Care & The Pension Protection Act. In 2006, this law was enacted to permit those with annuity contracts to have long-term care riders with special tax advantages. The Act allows the cash value of annuity contracts to be used to pay premiums on long-term care contracts.
7. Asset-Based Long-Term Care Solutions. The best planning approach for those who choose to self-insure is to “invest” some of their legacy assets so the assets can be worth as much as possible whenever they may be needed to pay for care. If unneeded, the money would then pass to the intended heirs, with no “use it or lose it” issues as with conventional long-term care insurance.
8. Long-Term Care Strategy Using IRA Money. Most people use their IRA to supplement retirement. However, sometimes waiting until age 72 when mandatory required minimum distribution rules apply, some people have instead opted to take a portion of their IRA and fund an IRA-based annuity which then systematically funds a 20-pay life insurance plan with long-term care features. This type of IRA-based long-term care policy is unique in the sense that it starts out as an IRA annuity policy, also known as a tax-qualified annuity, and then over a 20-year period makes equal distribution internally to the insurance carrier and funds the life insurance.
9. Important Documents for Long-Term Care Planning. Ask an experienced estate planning attorney about a power of attorney for health care and financial power of attorney, as well as an advance directive or living will.
10. Using Veterans Benefits to Pay For Long-Term Care. The VA offers a special pension: the Aid and Attendance (A&A) Benefit. This is a “pension benefit” and is not dependent upon service-related injuries for compensation.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “What Should I Know About Long-Term Care?” read also these additional articles: What Do Seniors Say About Aging in Place? and The Difference between Revocable and Irrevocable Trust and What Is Asset Protection Planning? and Do I Need a Prenup?

Reference: WGN (2022) “10 Crucial Things to Know about Long-Term Care“

A new study published in the Journal of the American Geriatrics Society found that the challenges posed to seniors – many of whom were left sequestered alone in their homes – actually increased the amount of trust they were able to place in themselves and their abilities.

Seasons’s recent article entitled “Pandemic has made seniors more confident about aging in place, study reports” reported on this survey.

In fact, the survey was a part of a larger study, which asked 214 respondents to rate their general self-confidence as well as their confidence in a variety of scenarios—from managing their health to social interactions. This might be confidence in their ability to arrange rides and appointments or seeking support when they need help understanding something.

The researchers from Northwestern University found significant differences between the 66 seniors who responded to the survey before the pandemic and the 148 who answered after.

In fact, pandemic-era respondents not only had higher confidence in general but reported significantly higher confidence in their abilities to manage social interactions.

“Self-doubt is a part of human nature,” the study’s authors wrote. “COVID-19 restrictions forced older adults to experience the loss of in-person human interactions and overcome their self-doubt in managing social interactions. Older adults adapted to the challenges of isolated aging in place and came ahead with higher self-efficacy.”

The news is positive, considering that 77% of older adults want to age in place, according to the AARP. A jump in confidence will be a big help for caregivers who don’t want to see their loved ones institutionalized. Moreover, it opens the door for the necessary planning that will be needed to keep a senior home long-term. This includes installing grab bars and ramps or reconfiguring a two-story house.

Aging in place is good for both seniors and their caregivers. By staying in their homes, older people are able to hold onto more of their independence as they can determine their day-to-day life.

Moving individuals at the end of their life can also have many detrimental effects, including anxiety, depression and loneliness.

For caregivers who are concerned about these aspects, keeping a loved one home can be a big relief with the right support.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “What Do Seniors Say About Aging in Place?” read also these additional articles: The Difference between Revocable and Irrevocable Trust and What Is Asset Protection Planning? and Do I Need a Prenup? and Can a 529 Plan Help with Estate Planning?

Reference: Seasons (Aug. 9, 2022) “Pandemic has made seniors more confident about aging in place, study reports”

About 50% of adults say that assistance for older adults should be funded by Medicare and Medicaid, according to an Associated Press-NORC Center poll.

MSN’s recent article entitled “Bipartisan support for policies to pay long-term care costs: Poll” says that 75% of adults surveyed say long-term care should be funded through Medicare Advantage or supplemental insurance programs. Close to two-thirds of respondents also said they’d support a government-administered insurance program, government funding for low-income people to receive long-term care at home and Social Security earnings credit or tax breaks for those providing long-term care to a senior.

Overall, 66% of respondents said they think it’s the federal government’s responsibility to make sure all people in the U.S. have health insurance coverage, with 73% of people aged 18-49 likely to support vs. 53% of those aged 50 and older.

Republican and Democratic responses were about the same, according to the poll.

About the same number of Republicans and Democrats favor nontaxable funds to pay for long-term care insurance—about 70%. The largest party difference was about the option for low-income people to receive government-funded, long-term care in their homes. Roughly 84% of Democrats supported this, compared to 55% of Republicans.

Overall public satisfaction with the U.S. healthcare system is low. Just 12% think the government is handling healthcare very or extremely well. When asked about healthcare specifics, 74% of adults said the U.S. handles prescription medication costs or mental healthcare “not too/not at all well,” and 70% said the same about mental healthcare.

The survey found that whites had a more negative view of the U.S. healthcare system compared to black and Hispanic adult respondents. When looking at healthcare for older adults, 56% of white adults think it is not too/not at all handled well, with 49% of Hispanic adults and 44% of black adults responding the same.

The poll consisted of 1,505 interviews between July 28 and August 1, with a 3.6% margin of error.

Under current law, MediCARE will only pay for the first 100 days of long term care.  After that, to pay for long term care, you need to either (a) have long term care insurance, (b) private pay out of your own funds (which will run at least $6,500 per month up to $9,000 per month in Louisiana); or (c) qualify for MediCAID Long Term Care benefits.  MediCAID is different from MediCARE.  MediCAID is a means based program intended for the poor, so to qualify and avoid losing your assets to nursing home poverty, it is best to get your plan in order well before you need to go into the nursing home.  I can help save at least half your assets even with a MediCAID crisis plan, but it is better to save all of your assets rather than merely half.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “What Do People Think About Government-Paid Long-Term Care?” read also these additional articles: The Difference between Revocable and Irrevocable Trust and What Is Asset Protection Planning? and Do I Need a Prenup? and Can a 529 Plan Help with Estate Planning?

Reference: MSN (Sep. 12, 2022) “Bipartisan support for policies to pay long-term care costs: Poll”

A living trust can be revocable or irrevocable, says Yahoo Finance’s recent article entitled “Revocable vs. Irrevocable Trusts: Which Is Better?” And not everyone needs a trust. For some, a will may be enough. However, if you have substantial assets you plan to pass on to family members or to charity, a trust can make this much easier. Keep in mind that both revocable trusts and irrevocable trusts avoid probate for the assets that are transferred to them.

A revocable trust is a trust that can be changed or terminated at any time during the lifetime of the grantor (i.e., the person making the trust). This means you could:

• Add or remove beneficiaries at any time
• Transfer new assets into the trust or remove ones that are in it
• Change the terms of the trust concerning how assets should be managed or distributed to beneficiaries; and
• Terminate or end the trust completely.

When you die, a revocable trust automatically becomes irrevocable and no further changes can be made to its terms. An irrevocable trust is permanent. If you create an irrevocable trust during your lifetime, any assets you transfer to the trust must stay in the trust. You can’t add or remove beneficiaries.  But you may be able to change certain terms of the trust, as long as they are purely “administrative” terms.  In other words, changing the successor trustees.  But  changing the beneficiaries may not be allowed under Louisiana law.

The big advantage of choosing a revocable trust is flexibility. A revocable trust allows you to make changes, and an irrevocable trust doesn’t. Revocable trusts can also allow your heirs to avoid probate when you die. However, a revocable trust doesn’t offer the same type of protection against creditors as an irrevocable trust. If you’re sued, creditors could still try to attach trust assets to satisfy a judgment. The assets in a revocable trust are part of your taxable estate and subject to federal estate taxes when you die.

An irrevocable trust has a big advantage: it can allow you to become qualified for long-term care benefits.  Plus, it can protect your assets from creditors, and in certain cases, irrevocable trusts can also help in managing estate tax obligations. The assets are owned by the trust (not you), so estate taxes can be avoided.

When it comes to most irrevocable trusts, you can act as your own trustee.  However, acting as your own trustee for some irrevocable trusts that are established for estate tax avoidance purposes is not suggested.

Speak with an experienced estate planning or probate attorney to see if a revocable or an irrevocable trust is best or whether you even need a trust at all.

I wrote a more detailed blog post entilted “What is the Main Purpose of a Trust” which can be obtained here: https://vicknairlawfirm.com/what-is-the-main-purpose-of-a-trust/

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “The Difference between Revocable and Irrevocable Trust” read also these additional articles: What Is Asset Protection Planning? and Do I Need a Prenup? and Can a 529 Plan Help with Estate Planning? and Can You Prevent Family Fights over Inheritance?

Reference: Yahoo Finance (Sep. 10, 2022) “Revocable vs. Irrevocable Trusts: Which Is Better?”

Yahoo’s recent article entitled “How to Protect Your Money, Even If You’re Not Rich” says that contrary to what many people believe, asset protection planning isn’t just for the wealthy. The estates of anyone, in any income group, can be sued or suffer from hefty taxation.

The following strategies in a good asset protection plan can mitigate the effect of creditor claims and other issues on your wealth.

If you want and need to protect your assets, you should be proactive. However, if you have significant debt and few assets and you are subject to a lawsuit, it may be better to file for bankruptcy than to create an asset protection plan.

That’s because it’s only worth it if you have significant assets, although some events cannot be protected against. These include tax liens, mechanics liens, alimony judgments and child support claims.

An plan benefits these people the most:

• Anyone with a significant amount of assets.
• Anyone with a significant, recurring amount of credit card debt.
• Homeowners underwater on their mortgage (your mortgage balance is greater than the value of your home).
• Anyone whose profession carries with it a high probability of liability, such as doctors and attorneys.

Some assets aren’t subject to creditors, such as retirement accounts under the protection of the Employee Retirement Income Security Act of 1974 (ERISA).

You may also legally preserve a small portion of your home equity. But Louisiana residents should not rely on this.  The amount exempt from seizure of Louisiana homeowners is only $35,000.  Contrast this with residents of Texas and Florida who generally have an unlimited exemption from seizure.

However, if you engage in asset protection planning ahead of time with a good estate planning attorney, your attorney can place your home into an asset protection trust, which can also qualify you for long-term care benefits and help your estate avoid probate, potentially saving you and your heirs tens of thousands, maybe hundreds of thousands, all while protecting your assets from lawsuits.  You really can have your cake and eat it too when it comes to asset protection planning.

For business owners or those who own property commercial or residental rental property, often an indespensible asset protection tool is a business entity such as a limited liability company or LLC.  But be careful with the use of corporations, since a C corporation or S corporation can have very negative income tax effects that you should avoid if you own appreciated or appreciating property.

The goal of asset protection planning is to set a level of legal separation between you and your assets. This allows you to legally shelter your assets from creditors without doing anything illegal.  This can be done through a good estate and asset protection attorney.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “What Is Asset Protection Planning?” read also these additional articles: Do I Need a Prenup? and Can a 529 Plan Help with Estate Planning? and Can You Prevent Family Fights over Inheritance?

Reference: Yahoo! (Nov. 6, 2022) “How to Protect Your Money, Even If You’re Not Rich”

While death is a certainty, some taxes aren’t when IRAs are used to make charitable bequests, explains a thought-provoking article titled “Win an Income-Tax Trifecta With Charitable Donations” from The Wall Street Journal. For those who are philanthropically minded and tax-savvy, this is an idea worth considering.

There are few better ways to leave funds to a charity than through traditional IRAs. The strategy is especially noteworthy now, given the growth in traditional IRA values over the last decade, even with the recent selloffs in bond and stock markets. At the end of 2022’s first quarter, traditional IRAs held about $11 trillion, more than double the $5 trillion in IRAs at the end of 2012.

With the demise of defined benefit pensions, traditional IRAs are now the largest financial account many people own, especially boomers. Therefore, it’s wise to know about applicable tax strategies.

The first advantage is tax efficiency. Donors of IRA assets at death win a three-way tax prize: no tax on the contributions going to the charity, no tax on annual growth and no tax on assets at death.

Compare this to donations of cash or investments, such as a stock held in a taxable account. For example, let’s say Jules wants to leave a total of $20,000 to several charities upon her death. She expects to have more than $20,000 in each of three accounts at this time. One account is cash, the other is a traditional IRA, holding stocks and funds, and the third is a taxable investment account holding stocks purchased decades ago.

A charitable bequest of assets from any of these three accounts will bring a federal estate-tax deduction. However, Jules’ estate will be smaller than the current estate tax exemption of about $12 million, so there are no federal estate taxes to consider.

Jules should focus on minimizing heirs’ income taxes on any assets she’s leaving them and donating traditional IRA assets is the way to go. If she leaves the IRA assets to heirs, they will have to empty the IRA within ten years and withdrawals will be taxable.

Giving IRA assets gets pretax dollars directly to the charities, which don’t pay taxes on the donation. A cash donation would be after tax dollars.

Donating the IRA assets to charity is also typically better than giving stock held in a taxable account. Because of the step-up provision, there is no capital gains on such investment assets held at death. If Jules bought the now $20,000 stock for $5,000, the step-up could save heirs capital gains tax on $15,000 when they sell the shares. If she donates the stock, heirs won’t get this valuable benefit.

Next, IRA donations allow for great flexibility. Circumstances in life change, so a will that is drawn up years before death could be changed over time, to give a bequest of a different size or to a different charity. It’s easier to make these changes with an IRA. One way is to set up a dedicated IRA naming one or more charities as beneficiaries and then moving assets from other IRAs into it via direct (and tax-free) transfers. Beneficiaries and the percentages can be easily changed, and the IRA owner can raise or lower the donation by transferring assets between IRAs.

If the IRA owner is 72 or older and has to take required minimum distributions, the owner can take out donations from different IRAs. Note the funds must go directly to the charity when making the donation.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “Can I Use an IRA to Reduce Estate Taxes?” read also these additional articles: Do I Need a Prenup? and Can a 529 Plan Help with Estate Planning? and Can You Prevent Family Fights over Inheritance? and Top Five Estate Planning Mistakes

Reference: The Wall Street Journal (Sep. 2, 2022) “Win an Income-Tax Trifecta With Charitable Donations”

Forbes’ recent article entitled “Prenuptial Agreement: What Is A Prenup & How Do I Get One?” explains that a prenup contemplates the end of the marriage, so the couple can divide assets with an objective mindset. A pre-nup can even help protect a business.

Prenups allow you to determine if alimony will be due if the marriage ends, as well as the amount and terms of those payments. A pre-nup can also say what kind of bequests you leave to each other in your will. It can also be good for couples trying to keep separate significant pieces of personal property, including future inheritances and other anticipated income. This is common for couples with a significant age or wealth difference and among older or remarrying couples.

Prenups Aren’t Just for the Very Wealthy. Prenups can be a useful tool for almost everyone.

Protect Family Heirlooms. If you have a family heirloom and want to make sure that if your marriage ends, you’ll get to keep it, you can draft a prenuptial agreement that states the family heirloom is yours.

Pass Property to Children from Prior Marriages. A prenup can be used to establish property rights for second marriages. If you have children from a previous marriage, you can protect their interests in your assets and property.

Clarify Financial Rights. Prenups can help you decide now how assets will be split up instead of waiting until divorce proceedings. While divorce may never come, determining the financial distribution now saves time and headache.

Debt Protection. Prenups also provide debt protection. Some people enter a marriage with substantial financial debts, tax debts, or student loan debt. For couples in this situation, they can sign a prenup and clarify that those debts remain the separate responsibility of the spouse who incurred them, and thereby protect the income and assets of the other spouse.  They can also decide how debts incurred during the marriage will be handled.

Avoid Emotional Arguments. Divorce is emotional. It can be an overwhelming and upsetting process. When you’re negotiating with your spouse about assets, tempers can cloud your judgment about asset distribution. Contemplating these items with a clearer head is better for all.

In answering the question, “Do I need a Prenup?”, under Louisiana law, if you want a pre-nup after getting married (effectively a “post-nup”), you and your spouse have to petition the court in your parish of residence to have the community property regime dissolved judicially.  This can be an expensive process, and may not be used to avoid the unwanted debts that may have been already incurred.

Also, when answering the question, “Do I Need a Prenup?”, keep in mind that if you don’t have one, and one spouse has substantial “separate property”, the income produced by that separate property is community property.  This classification of the income from separate property as community property can include rents, interest, or other earnings from your separate property.  This can result in coomingling of your separate property with community property income over time.  In the event of a divorce, this can present a problem.  If you want to make sure that the income produced by your separate property remains separate, and you don’t have a pre-nup, you have to deliver to your spouse something called a “declaration of paraphernality”, and for it to be effective, you have to be able to prove that it was sent and delivered to your spouse.  Best to do this via certified mail.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “Do I Need a Prenup?” read also these additional articles: Can a 529 Plan Help with Estate Planning? and Can You Prevent Family Fights over Inheritance? and Top Five Estate Planning Mistakes and What Do You Need to Do When a Spouse Dies?

Reference: Forbes (Oct. 24, 2022) “Prenuptial Agreement: What Is A Prenup & How Do I Get One?”

Parents and grandparents use 529 education savings plans to help with the cost of college expenses. However, they are also a good tool for estate planning, according to a recent article, “Reap The Recently-Created Planning Advantages Of 529 Plans” from Forbes.

There’s no federal income tax deduction for contributions to a 529 account. However, 35 states provide a state income tax benefit—a credit or deduction—for contributions, as long as the account is in the state’s plan. Six of those 35 states provide income tax benefits for contributions to any 529 plan, regardless of the state it’s based in.

Contributions also receive federal estate and gift tax benefits. A contribution qualifies for the annual gift tax exclusion, which is $17,000 per beneficiary for gifts made in 2023. Making a contribution up to this amount avoids gift taxes and, even better, doesn’t reduce your lifetime estate and gift tax exemption amount.

Benefits don’t stop there. If it works with the rest of your estate and tax planning, in one year, you can use up to five years’ worth of annual gift tax exclusions with 529 contributions. You may contribute up to $85,000 per beneficiary without triggering gift taxes or reducing your lifetime exemption.

You can, of course, make smaller amounts without incurring gift taxes. However, if this size gift works with your estate plan, you can choose to use the annual exclusion for a grandchild for the next five years. Making this move can remove a significant amount from your estate for federal estate tax purposes.

While the money is out of your estate, you still maintain some control over it. You choose among the investment options offered by the 529 plan. You also have the ability to change the beneficiary of the account to another family member or even to yourself, if it will be used for qualified educational purposes.

The money can be withdrawn from a 529 account if it is needed or if it becomes clear the beneficiary won’t use it for educational purposes. The accumulated income and gains will be taxed and subject to a 10% penalty but the original contribution is not taxed or penalized. It may be better to change the beneficiary if another family member is more likely to need it.

As long as they remain in the account, investment income and gains earned compound tax free. Distributions are also tax free, as long as they are used to pay for qualified education expenses.

In recent years, the definition of qualified educational expenses has changed. When these accounts were first created, many did not permit money to be spent on computers and internet fees. Today, they can be used for computers, room, and board, required books and supplies, tuition and most fees.

The most recent expansion is that 529 accounts can be used to pay for a certain amount of student debt. However, if it is used to pay interest on a loan, the interest is not tax deductible.

Finally, a 2021 law made it possible for a grandparent to set up a 529 account for a grandchild and distributions from the 529 account are not counted as income to the grandchild. This is important when students are applying for financial aid; before this law changed, the funds in the 529 accounts would reduce the student’s likelihood of getting financial aid.

Two factors to consider: which state’s 529 is most advantageous to you and how it can be used as part of your estate plan.

BOOK A CALL with me, Ted Vicknair, Louisiana Board Certified Estate Planning and Administration Specialist, Louisiana Board Certified Tax Law Specialist, and Louisiana CPA to learn more about estate planning in Louisiana, incapacity planning, and Louisiana asset protection.

If you liked this article, “Can a 529 Plan Help with Estate Planning?” read also these additional articles: Can You Prevent Family Fights over Inheritance? and Top Five Estate Planning Mistakes and What Do You Need to Do When a Spouse Dies? and What If Estate Is Beneficiary of an IRA?

Reference: Forbes (Oct. 27, 2022) “Reap The Recently-Created Planning Advantages Of 529 Plans”