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It's my favorite week of the year...spending Pensacola BEACH time with 45 members of my family! We are spread out over t...
06/17/2026

It's my favorite week of the year...spending Pensacola BEACH time with 45 members of my family! We are spread out over three houses this year but the large/main beachfront home that I am in sold this April for $5.5 million (yes, that's insane) and the previous owners paid $2.65 million in February 2019, so it MORE than doubled in 7 years! Obviously, much of the adult beach conversation has been about capital gains (and why didn't WE all chip in and buy this house back in 2019!) so I decided to re-post this great article I did back in 2022, but all information is still accurate. Enjoy!

Here is the text so it's easier to read:

Here’s Your 411 on 121 and 1031!

Real estate prices have never been higher, so we have been fielding lots of questions about the implications of selling property for a significant profit. While we are not accountants, nor CPAs, a good estate planning attorney must have a competent understanding of these issues to dispense the proper advice. This article is meant to be only a primer on these issues and we highly suggest you speak in more detail with your own tax professional.

Let’s start with what is called the “Section 121 Exclusion” (principal residence tax exclusion). This Internal Revenue Code (IRC) section allows you to exclude the first $250,000 ($500,000 if married and filing jointly) of capital gains from the sale of your PRIMARY home if you meet certain requirements. Many people don’t realize this “new” law has actually been around for 25 years now! (Before that, you either had to purchase a more expensive home or if you were over age 55 you had a one-time exclusion of the first $125,000 of capital gains.)

It's pretty simple, if you have owned and lived in the home as your PRIMARY residence for two of the last five years (the 2 yrs/730 days do not have to be consecutive) prior to the Act of Sale then the first $250,000 of capital gains is excluded ($500,000 for a married couple filing jointly). It is fine if the title is only in one spouse’s name, but BOTH spouses must have resided there for the 2 year period. Even if your spouse has predeceased you, you still have two years from your spouse’s date of death to utilize their “extra” $250,000 exclusion amount (as long as you have not remarried). If during any part of the last five years the home was used as a rental property or as a home office deduction, discuss this further with your tax professional as this will offset some of the exclusion amount.

I have many clients who literally do this every two years! They buy properties that need some TLC at a good price, fix them up and live in them for the two year period and then sell them for a hefty profit and their first $500,000 of capital gains is FREE. God Bless America!

But what if the property being sold isn’t your primary home? Now we look at what is called the “Section 1031 Exchange” (like-kind exchange). Basically, this neat aspect under the IRC allows you simply to “defer” paying capital gains until a later time, and maybe not ever if the property is held until death and gets a “step-up” in basis (read last month’s “Step Right Up” article for more on that).

The property must be used for business, trade or investment (so not your primary or second home, unless it’s rented out) so this is often used for rental property. You will want to use an experienced qualified 1031 intermediary company to handle the process. This is like doing a “swap” of properties, but usually for a property worth more (or the same). Let’s say I purchased a rental property for $150,000, and it has been depreciated down to $100,000, and I now have a buyer giving me $300,000. If I simply sold it now, I would be paying capital gains taxes on $200,000 of gain. If, however, I found another rental property for $300,000 (or more) I could buy the new property using a 1031 exchange. Although my “basis” remains at the $100,000 mark, I have managed to “defer” my capital gains taxes until I sell this new replacement property. If I die before I sell, then my spouse and/or my children will now inherit this property at the full fair market value as of the date of my death. They can now sell the property and pay NO capital gains at all.

Unfortunately, a 1031 exchange comes with “set in stone” deadlines. When I sell my property (and the 1031 intermediary holds my $300,000) I MUST clearly identify the new property that will replace it within 45 days of my sale (I am allowed to identify up to 3 properties that I may choose) and then I must close on the sale within 180 days of my initial sale.

I have many clients who have been deferring their capital gains for decades upon decades, and if the property was community property, when the first spouse dies, the surviving spouse can now sell it for full fair market value with ZERO capital gains. If you are married and have inherited (separate) property that is subject to a 1031 exchange, or for whatever reason has very low (maybe even zero) basis, you may want to discuss with your estate planning attorney and CPA the pros (and cons) of converting that property to community to be able to get a step-up in basis at the death of either spouse. Now that is some good estate planning! Use this 411 to make good decisions when buying/selling real estate, and hopefully pay less taxes to Uncle Sam.

Here we go again! Carnival Cruise lines (and their subsidiaries, like Holland America and Princess Cruises) was hacked a...
06/02/2026

Here we go again! Carnival Cruise lines (and their subsidiaries, like Holland America and Princess Cruises) was hacked affecting nearly 6 million people! These types of hacks will happen again and again so if you haven't yet...FREEZE YOUR SOCIAL SECURITY NUMBER! All can also be done online and I have the links listed in the comments.

The most common telephone question we get: "IS THERE A FORM FOR THAT?" (A close second and third place: "can I ask a qu...
05/27/2026

The most common telephone question we get: "IS THERE A FORM FOR THAT?" (A close second and third place: "can I ask a quick legal question?" and "do you charge for that?") Here is a good article I wrote in 2022, all still accurate except the gift amount for 2026 is now $19,000. Full article in text below (with updated 2026 figure).

Is There a Form for That?

That is such a common question we hear! The short answer is: MAYBE, but we are not giving you one! Why, you ask? Because in estate planning (and life in general) every action has a REACTION. And it’s that reaction that gets you in trouble. Once you read this, you will know why it is not good practice to just provide a form.

The most common “form” question is: Can’t you just give me a form so my mother can put her house in my name? For just that one “simple” question, let’s look at all the REACTIONS to that action.

This is called an “Act of Donation” and no, it isn’t just a “form”. Under Louisiana law, an Act of Donation must be prepared properly to even be valid. The criteria include: it must be crystal clear that it’s an irrevocable donation; it must include an accurate and complete legal description; and the format in which it is drafted is sacrosanct (just like a Last Will). It must be in “authentic act” which means each party (Donors and Donees) must sign the Donation in the presence of two witnesses and a Notary Public-- everyone in the same room at the same time to sign and witness the signatures. There are no exceptions! If not done properly, it is invalid. (If you’re a nerd like me, Google this interesting case: Zamjahn v. Zamjahn.)

Once the Act of Donation is properly drafted and executed, it now needs to be recorded in the Conveyance records in the Parish where the property is located for accurate “notice to third parties,” and the Parish tax assessor gets notified. Depending on the circumstances, the property will likely be reassessed, and the Homestead Exemption and Senior Freeze, if any, will be lost if the Donee does not reside there. Retaining Homestead Exemption and the Senior Freeze are additional issues that should be addressed with proper legal representation, like retention of usufruct, perhaps. But how do you know about these issues if you just get a form?

Next reaction: What do you mean there’s a limit to how much my mom can give me? Yep, one can only gift or donate up to $19,000 per year (for 2026) per person without the requirement to file a Form 709 Federal Gift Tax return. If you want to know more about that, ask your accountant about that “form”! Just like your annual tax return, it’s just another form, but I am sure to pay my CPA to file that for me, because I won’t risk the IRS reactions that I may not know about!

Wow, there really can’t be any more reactions, right? Wrong! If mom just donated her property to you, your “basis” is now whatever mom’s basis was. Maybe it’s what she purchased it for many years ago, or perhaps mom inherited it. Regardless, it’s NOT the fair market value (FMV) as of the date of the gift (although that is the value that will be reported on that gift tax return). If, however, mom had kept the property in her own name and you then inherited it at mom’s death, then the basis would be stepped up to the FMV as of mom’s date of death.

Anything else, you ask? Why YES! Most of the time, the reason people are asking for this “magic” form is because they heard this is how Mom can get on Medicaid, and then the “government won’t take my mom’s house”. Well, that’s another whole article, but the short answer is you probably just shot yourself in the foot as that gift means that Mom cannot qualify for Medicaid for another five years. Of course, we have other options for this too, but you won’t find them on a “form”.

All of the above “reactions” can occur from doing a “simple” Act of Donation “form” without proper counsel. Imagine how many reactions there would be if we just provided a “form” for a Last Will, a Living Trust, Powers of Attorney, and the list goes on and on.
I realize trivializing legal documents as “just a form” is just an attempt to save money, but we all know the old adage “you get what you pay for” is true in most cases. If it’s a FREE form you want, you must be willing to accept the consequences, and risk spending more money to correct what has been done, if it’s not too late to do so.

05/22/2026

FDIC coverage and trusts (yes, even some Banks don't know this):

Under certain circumstances, ONE trust (either revocable or irrevocable) may have $2,500,000 of FDIC coverage! So, yes, if you are uber-rich (and have a lot of beneficiaries) you can literally have just one CD (certificate of deposit) titled in the "Doe Living Trust" name FDIC insured for $2,500,000!

Here is how - FDIC coverage is up to $1,250,000 per Trustor/Settlor/Grantor, if you have 5 (or more) distinct beneficiaries. So, if husband and wife have a JOINT LIVING TRUST (as 99% of our married trusts are) then if there are 5 (or more) beneficiaries for each Settlor under the trust, then each Trust Settlor (e.g. husband and wife) would get the full $1,250,000 of coverage, hence the $2,500,000.

And yes, it's even possible that the FDIC coverage could be even more if perhaps there were additional Settlors (but this is very rare for us).

You do NOT get the $250k of FDIC coverage for each Settlor, only for the beneficiaries, so if H/W joint trust only has two beneficiaries each (e.g. their son and daughter) they would only get $1,000,000 of FDIC coverage ($250k x 4).

This same rule applies to bank accounts/CDs that have P.O.D. (payable on death) beneficiary designations, again, it ONLY applies to the POD beneficiaries, NOT the account owner(s). Now, if you did not name POD beneficiaries (or Bank somewhere that simply doesn't offer POD accounts, hey MEGA-BANK you know who you are), then each account owner would get their own $250k of FDIC coverage each.

In the comments section below, I have a link to the cool FDIC estimator link.

05/20/2026

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What’s a Usufruct? (No, it’s NOT a Cuss word!) by Ronda M. GabbIf you have lived in Louisiana long enough, you surely ha...
05/20/2026

What’s a Usufruct? (No, it’s NOT a Cuss word!) by Ronda M. Gabb

If you have lived in Louisiana long enough, you surely have heard of the word “usufruct”. And when uttered, you do not need to wash one’s mouth out with soap, it truly is a real legal word. And now we will learn how to pronounce it properly…it comes from two words of Latin origin 1) USUS, meaning the “use” and enjoyment of the asset, and 2) FRUCTUS, meaning the “fruits” (like rent, income, or interest) of the asset. When you put these two words together, USU-FRUCT…you have usufruct! (Please say it with a hard “R”!)

The most common usufruct occurs when someone dies intestate. “Intestate” simply means that the decedent died without leaving behind a valid Last Will and Testament. If Bill and Mary have been married for many years and all their assets were acquired during their marriage, they are classified as community property assets. If Bill dies intestate, all of Bill’s community property assets will go equally to all of his children and Mary will enjoy a “usufruct” over all of those assets, regardless as to whether Mary was the mother of Bill’s children or not. This usufruct will last for Mary’s lifetime or until she remarries, whichever first occurs. Yes, this means that the intestate usufruct of a surviving spouse ends when they remarry. Bill’s children will inherit the “naked ownership” (legally called the abusus) until Mary’s usufruct terminates, at which point the children will then become the full and complete owners of those assets. One of my favorite legal sentences is this: “Naked ownership will always ripen to become full ownership upon the termination of the usufruct.” (Yes, I’m a proud nerd. Always have been.)

In more rare circumstances, we see an intestate usufruct come into existence when the decedent dies without children, and without community property, and leaves behind parents and siblings. In this case, the “naked ownership” of the decedent’s separate property would divest to his siblings, per stirpes (in equal shares only if all were full-blooded siblings), subject to a lifetime usufruct shared equally in favor of the decedent’s parents.

Notice that the usufructuary (the legal name of the person enjoying the usufruct) does not have the power to sell the assets subject to the usufruct. If the usufruct is over the family home (of which Mary still owns her community half) and Mary wishes to sell, she must obtain the permission of all of Bill’s children (not just a majority), who are the naked owners. If Bill had no children, nor community property, and Bill’s siblings were the “naked owners” then they would need the permission of Bill’s parents, and sometimes that’s NOT the parent of the naked owner…what if Bill had half-siblings!?

Just remember though, all of the above assumes Bill died without a valid Will. With a properly drafted Will, Bill could grant to Mary, as usufructuary, the power to sell the assets without needing the children’s (naked owners) permission. This “power to dispose of the non-consumables” (also referred to as a “super” usufruct) may apply to real estate, stocks, and any other type of asset. Bill could also guarantee that Mary’s usufruct would last for her lifetime, regardless of remarriage, and state that Mary would not need to post any bond as the usufructuary.

In most cases, Bill wants Mary to have full use and control of his assets during her lifetime, yet when Mary dies, Bill wants his assets to go to his children (or maybe his siblings if he had no children or community property). If Mary has spent Bill’s assets, then Mary’s estate would owe the value of those assets back to Bill’s naked owners (children or siblings) upon her death. This protects Bill’s naked owners so that, upon the death of Mary, no matter what Mary’s new Last Will may say (e.g. all to her new husband, or her own children, or to a charity), Bill’s naked owners (children/siblings) will be “made whole” upon Mary’s death.

Also note that having a usufruct over one’s primary residence still qualifies for the Louisiana Homestead Exemption and the Senior Freeze. With proper planning, using the unique Louisiana concept of usufruct in estate planning can be very safe, convenient, and easy.

05/18/2026

The SECURE Act laws began in 2020 and did drastically change the timeline that MANY people must pull out of an IRA that they inherited from a deceased loved one. However, note that I didn't say ALL people (or even MOST). There are still quite a few beneficiaries that are still allowed to pull out over their own life expectancies, just like BEFORE the SECURE Act was passed.

One of those lessor known beneficiaries (called an "Eligible Designated Beneficiary" or EDB) is someone who is NOT more than 10 years younger than the original deceased IRA owner. In this case, it was the deceased's brother who was almost 2 years OLDER than his deceased brother. This means this EDB is able to continue the IRA as an "inherited IRA" and only has to take Required Minium Distributions (RMD) over his own life expectancy which was almost 15 years, 5 years LONGER than the new SECURE Act rule which is "all by December 31st of the 10th year following the original IRA owner's death".

This man's financial advisor told him it only applied if he was YOUNGER than his brother...ummm..NO! Just as long as he is NOT MORE THAN 10 YEARS YOUNGER, really?

The other qualifications for EDB are: 1) SPOUSE 2) Disabled or Chronically Ill beneficiaries (obviously for special needs children) and 3) MINOR children (another big misconception but I will make it easy - by December 31st of the year they turn 31 years old, and it's only children or stepchildren, NOT GRANDCHILDREN).

05/09/2026

Be careful when you renew your passport online as it IMMEDIATELY cancels your current passport and you can no longer use it for international travel. This is messing up a lot of people lately.

I received a nice email from the State Department reminding me that my passport will expire in one year and giving me great instruction on how to easily renew it online. It says nothing about this in their email, nor when you click on the "renewal" guidelines. It's not until you actually are submitting your renewal and it is very easy to miss!

Luckily, I read about this on another site so I plan on renewing my passport in August when I am "in between" two international trips, or it may have bitten me too.

Their website says online renewal can take 4-6 weeks but most folks posting are saying it has been much quicker, like 1-3 weeks, so that's good.

Also remember that for many international destinations your passport must be valid for a full SIX (6) MONTHS after your last day of travel! Know before you go! Link to information in comments (travel advisories, passport requirements, etc.)

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