LOUISIANA LIVING TRUSTS CONSIDERATIONS

LOUISIANA LIVING TRUSTS

Office Locations: Ponchatoula, Louisiana (985) 845-3414;  Madisonville (985) 792-5220

A Living Trust is sometimes also referred to as a “Loving Trust”, especially by national marketing firms trying to sell it as a product with disclaimers to allow you to create your own trust. They claim that they are valid in all 50 states (does that concern you?) and that you will avoid taxation etc.  See the discussion on the Tax Considerations. This blog gives only very general and limited information to help you understand how this type of planning works.  Very complex tax and legal rules apply and you should not create this type of Trust without the help of a Louisiana Trust Attorney.  Almost all Louisiana Living Trusts lawyers also do more traditional Wills and Trusts as an alternative.

By their nature the typical Living Trust is a Revocable Trusts since the person creating the trust (settlor) typically can revoke the trust, take the property out of Trust or amend the trust to change beneficiaries etc.  But not all revocable trusts are considered to be Living Trusts as that term has become known.

Living Trusts vs. Last Will

Should you use a Living Trust to protect yourself and your family?  Is more traditional planning with a Last Will & Testament, Durable Power of Attorney and Medical Power of Attorney better under your circumstances?  In the various pages herein I attempt to give some of the general advantages and disadvantages to help with this decision making process.  Each situation is different and must be evaluated based on its unique facts and circumstances.  Hopefully the discussion on these various topics will shed some light on the main factors to be considered.

“Caveat Emptor” – Let the Buyer Beware

As a general rule, if you are advised to implement a Living Trust by a lawyer before you have an opportunity to provide details of your assets, liabilities, family history and family dynamics, that should raise some concern. How can an attorney advise a course of estate and tax planning without this information?  The answer is he or she cannot!  Creating a Living Trust to use as a will substitute may be the best solution, but many factors go into making an informed decision.  Purchasing a Living Trust “kit” from a national company that guarantees it is good in all 50 states should as a matter of common sense raise a high level of concern.  These are complicated topics and Louisiana more so than most of the other 49 states has rules and laws (e.g. forced heirship only exists in Louisiana) that make this very dangerous indeed.  Notice the fine print at the bottom of some of these documents and you may see where they have disclaimers if you reside in Louisiana.

Living Trusts as a Will Substitute

Living Trusts are used as a substitute for a Last Will and Testament in many states, including Louisiana.  In some instances this works well, but Louisiana law has sufficient differences from other states that careful consideration of each individual situation must be examined prior to choosing this planning tool.  Changes made in 2001 allowing for an “independent executor” have created alternatives to the Living Trust that at least should be examined. Prior to these changes I, as an attorney, was more likely to recommend a Living Trust than after these changes to La. law were made.  In some instances I still do recommend using a Living Trust and Pour Over Will when this type of Estate Plan is right for you.  See the comparison of Living Trusts vs. Last Will planning types.  A quick overview of Living Trusts benefits and limitations is given here, but a more thorough examination of each follows:

  • Probate avoidance – Theoretically Possible.  Examination of the types of assets and costs to transfer, the settlor(s) ages, occupation, ease of use and other factors is necessary.  In any event a “Pour over” Will must be implemented for assets not placed in the Living Trust.  Louisiana also now has an “independent executor” statute that if used can substantially reduce probate costs.
  • Future Disability – The Trust can be used to provide for continuation of financial affairs if the settlor becomes disabled.  There are alternative methods of accomplishing this with a durable power of attorney i.e. one that survives a disability.
  • Revocable – These trusts are typically revocable trusts i.e. the Trust can be revoked in whole or in part and property returned to the settlor.  This lends flexibility to the plan and can give a trial run to evaluate the chosen Trustee.  However, in most cases the trustee is the settlor.
  • Privacy Considerations – Living Trusts can serve to provide privacy, but to the extent real estate is involved some benefits may be lost.
  • Income and Estate Taxation – Typically since these are revocable trusts no tax benefits are gained through their use.  See the more detailed discussion on this topic under the Income Tax and Estate Tax discussion.  Many national companies have misleading information on the tax benefits.
  • Reduction in Legal and Accounting Fees –  Each situation is different, but careful examination of the total overall costs must be made.  Implementation of a Living Trusts and transfers of property into it will almost always involve more up-front costs.  Administration of the Trust during life typically involves additional costs and eventually property must be transferred out, which in the case of real estate results in legal and filing fees.
  • Out of State Property – Use of a Living Trust for real estate outside your state of residence is an excellent tool to avoid Ancillary Probate i.e. having to go through Probate or similar proceedings in that state where the property is located.

Conclusion

As stated many times, each situation must be looked at closely to make the decision as to what is the best planning for you and your family.  Hopefully some of the information contained herein can help to educate you on the choices available, the advantages and disadvantages of different planning techniques.  Please read on for more information and leave you comments and questions.

This blog is provided by A. David Aymond, L.L.C., Attorney at Law, 209 Hwy. 22, Ste. G, Madisonville, La.  (985) 792-5220.  If you wish to create a Living Trust or use more traditional wills with testamentary trusts, give me a call.  For our full website visit www.aymondlaw.com.

Disclaimer: Nothing contained herein creates an attorney/client relationship and no general information contained herein should be relied upon in your unique situation.  Always seek the advice of a licensed attorney familiar with your particular situation.  The material contained herein and responses to general comments is intended for educational purposes only.  An Attorney/Client relationship will only be established with a written Attorney/Client Representation Agreement.

Tags:  Living Trusts in Louisiana, Louisiana wills and trusts, Louisiana Wills vs Trusts, Louisiana Wills and Trusts Lawyer

 

 

 

 

 

 

 

 

 

 

 

 

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