USE OF LIFE INSURANCE IN ESTATE PLANNING
General Concepts of Estate Planning with Life Insurance
There is a misconception among many people that life insurance proceeds are not included for calculation of federal estate tax. If a life insurance policy is community property, one half (1/2) of the proceeds will usually be included in the estate of the insured spouse. This will be the case even where the proceeds are payable to a named beneficiary other than the estate if the decedent owned the policy or possessed any" incidents of ownership" in the policy.
An incident of ownership can result in a number of ways and would cause the proceeds to be subject to estate tax. For example, the mere right to change policy beneficiaries is an incident of ownership which causes inclusion. The ability to borrow against the policy is also an incident of ownership causing inclusion.
Forced Heirship – Does SSDI qualification make you a forced heir?
There are a number of Louisiana cases that have considered petitions filed by children claiming they are forced heirs in situations where the parent has left them out of a Last Will and Testament. Many of the cases do not involve persons receiving Social Security Disability Income (SSDI), but rely on medical evidence to prove their case. The issue focused on here is whether qualification for SSDI is considered determinative of the issue of forced heirship.
Louisiana Law Provisions:
First, for an examination of the basic rules of forced heirship in Louisiana. La. C.C. art. 1493 (A) provides that:
What is Forced Heirship:
Louisiana is the only state in the United States that has the institution of forced heirship. In the past, Louisiana law provided that all children (and descendants of a predeceased child) were classified as forced heirs. The new laws provide much more testamentary freedom (to leave your property to others) by restricting the persons that will be classified as forced heirs. A portion of the estate referred to as the "disposable portion" is not subject to the claims of forced heirs. If there are no forced heirs, then testamentary freedom is available over the entire estate. If there is one forced heir, the disposable portion is 3/4ths of the estate. With two or more forced heirs, the disposable portion is one-half of the estate.
There are now only two major categories of forced heirs, being 1) children under 24 years old and 2) certain disabled children regardless of age. There is a sub-category of forced heir where your child has predeceased you making classifying children of the predeceased child (decedent's grandchildren) forced heirs.
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