In many states, the process of transferring property at death is referred to as probate; in Louisiana, that process is typically called a succession. There are many misconceptions about what a succession is and when it is required and this article attempts to clarify those misconceptions.
Any time a person wants to transfer any type of property during their lifetime (whether it be a vehicle, stock or real estate) they have to sign some type of document to accomplish that transfer. Of course, when they pass away they can no longer sign documents to transfer their property and that is why a succession is necessary. In a succession, a list is made of all of the assets and debts of the deceased’s estate and a petition is filed asking the judge to put the deceased’s heirs (those entitled to inherit when there is no will) or legatees (those beneficiaries named in a will) in possession of the assets described in the list.
Thus, whether there is a will or not, a succession is usually required. There are a few instances where a succession is not required. The first is if all of the deceased’s assets are owned in accounts that do not pass through the probate estate. Life insurance, annuities and retirement plans with valid beneficiaries are non-probate assets that do not require a succession for transfer. Rather, they transfer to the named beneficiary in accordance with the rules of the account holder. Generally, a death certificate and the account holder’s forms must be submitted to accomplish the transfer.
Also, property owned in a trust and not by an individual does not require probate as the trust continues after the person’s death and the property is transferred to the trust beneficiaries in accordance with the trust’s terms. For most other types of property (bank accounts, CDs, investment accounts, real estate, and personal property), a succession is required for a valid transfer.
What type of succession is required depends upon the type and value of the assets owned. If the deceased’s assets were less than $75,000 and he owned no real estate then a small succession affidavit which does not have to be filed with the court can be used to transfer the assets. If, however, the assets are greater than $75,000 or there is real estate involved, a regular succession through the court system will usually be required.
For deaths occurring prior to July 1, 2004, Louisiana inheritance taxes are due and interest and penalties began accruing nine months after the date of death. So it’s important to complete successions for those dying before July 1, 2004 as soon as possible to avoid interest and penalties. Between July 1, 2004 and January 1, 2008, inheritance taxes were only due if a succession was not opened within nine months from the date of death. Again, it was important to open the succession as soon as possible to avoid those taxes. However, since January 1, 2008, Louisiana does not impose an inheritance tax on estates for persons dying after that date. Since no taxes are due some take the position that a succession is not required within any certain time period. However, there are still many practical reasons to complete a succession as soon as possible.
The first is that unless a succession has been opened, property belonging to the deceased cannot be sold or transferred. Thus, the desire to sell the deceased’s property is often the impetus to begin the succession process. Next, for income tax purposes, a step up in income tax basis is allowed for property passing from the deceased to his heirs or legatees. This means the heirs and legatees inherit the property at the value it had on the deceased’s date of death and only pay income tax on the difference between that value and the price they sell it for. This step up in basis can often provide a substantial income tax savings for heirs and legatees. It is much easier to value property if it is done in close proximity to the date of death. If many years pass before appraisals are done, it may be more difficult and costly to value the property to receive this stepped-up basis.
Also, as years pass, heirs or legatees may die making the succession process more difficult and costly as lost heirs must be found in order to complete the succession. I have been involved in many successions that took years to complete because they were not done in a timely manner and heirs had to be located all over the country. I have also been involved in those we were unable to complete because we could not find some of the heirs. Finally, wills and other important documents necessary to complete a succession may be lost with the passage of time and the correct parties might not even inherit as intended by the deceased because the will cannot be found.
As you can see, a succession will be required in most circumstances when a person dies. Whether that is a small succession by affidavit or a regular succession through the court system depends on the value and character of the deceased’s property. However, if he owned real estate, a regular succession through the court system is usually required. Also, from a practical viewpoint, it is best to complete that succession as soon as practicable after death to avoid lost documents, easier valuation of property, and the search for lost heirs. It is not only advisable, but also necessary, to complete the succession if the deceased’s property is to be sold or transferred to others.