How living trusts in Louisiana can offer peace of mind and flexibility

What is a living trust?

An agreement that holds assets and property acquired throughout the settlor's (trust maker's) lifetime is known as a living trust. The settlor determines the beneficiaries of the living trust. After the settlor's passing, the beneficiaries will receive the trust's assets. Another term for this is an "inter vivos" trust.

It is managed by a trustee in charge of distributing the assets to the designated beneficiaries. The grantor, also known as the settlor or another individual, can hold the trustee position.

A will might be helpful if you want to leave property to your heirs. Before this is possible, a will must go through the legal procedure known as probate. We are here to make the costly and drawn-out process of probate as simple as possible.

What is probate?

When a loved one passes away, the estate assets are frequently managed and dispersed through a court-supervised legal process called probate or estate administration. The size, complexity, and systems of the local probate court, and the size of the estate, all affect how long it takes to complete the probate of an estate.

Although each probate estate is different, these processes are often followed:

• Petition submission to the appropriate probate court.
• Giving notice to the will's heirs or the statutory heirs in the absence of a will.
• Petition to appoint an administrator or executor of the estate (if there is a will).
• Estate assets are listed and valued by the executor or administrator.
• Settling estate debt with legitimate creditors.
• Sale of estate assets.
• Paying due estate taxes.
• Final assets transferred to heirs.

Overview of a Louisiana living trust

In Louisiana, a living trust is a crucial choice to consider while preparing your estate. In a way that no other legal option can, a revocable living trust, also known as an "inter vivos" trust, allows you complete control over your assets during your lifetime and beyond.

You are the settlor when you establish a living trust in Louisiana. The trust's terms are set forth by the settlor, who also adds assets to the trust. To administer the assets, a trustee must be chosen. Self-designation is typical, with a successor trustee designated to take over in the event of your demise.

As the trustee, you are responsible for overseeing the assets for your own benefit. The successor trustee then carries out the instructions you specify in the trust regarding how the assets are distributed to the beneficiaries when you pass away.

While you are still alive, you can modify or even revoke your revocable trust. An irrevocable living trust cannot be changed after it is established.

A Louisiana living trust avoids the probate procedure, in which a judge verifies and executes a will by transferring the trust's assets directly to your beneficiaries. An executor, an attorney, and court costs are all involved in the lengthy probate process.

Louisiana has not implemented the Uniform Probate Code. Hence its operations are not streamlined. A smaller estate method that is quicker and less expensive can be used for estates valued at less than $75,000. If your estate is smaller than this threshold, planning for it may be cheaper than setting up a trust.

What are the types of living trusts in Louisiana?

Revocable living trusts and irrevocable living trusts are the two types of living trusts that can be created under the Louisiana estate plan.

Revocable trusts

A trust is established with the ability for the settlor to change or remove provisions at any time. Contrary to some specialized trusts, revocable living trusts can accept and "store" the majority of asset kinds, including but not limited to:

• Homes
• Real estate
• Cars
• Boats and recreational vehicles
• Financial records, such as stock portfolios and cash deposits
• Firearms

Certain trusts have irreversible terms, which implies they cannot be amended or modified. However, a person who creates a revocable living trust can transfer assets in and out of the trust as and when required. They also continue to have lifetime access to and use of the trust's assets.

Benefits of revocable trusts

Eliminating probate

If a revocable trust is adequately funded and maintained, which involves little effort but some attention to detail, it will avoid probating its expense and administrative burden. A revocable trust will avoid probate for spouses in a married pair (a twofold advantage with a single joint trust). Although the cost of a revocable trust is frequently less than that of a probate, costs should not be the only consideration when setting up a revocable trust in Louisiana.

Keeping ancillary probate at bay

This probate is necessary if a person has real estate properties (immovable property) in more than one jurisdiction. Ancillary probate conducts the probate process outside of your home state. Owned by a revocable trust, all the assets, including real estate located in both states, will be spared the expense and administrative hassle of a probate court.

Maintaining privacy

A Revocable Trust is not documented anywhere (unlike a Will). Therefore, the conditions of your trust are not available for public inspection by creditors and enquirers. This is one of the differences between a Will and a Trust. If your trust owns real properties, an "extract of trust" with the bare minimum of information necessary must be placed in the conveyance records. Maintaining this trust document as a public record is important to convince a meticulous title examiner that your trust genuinely exists and is not a hoax.

Helping incapable people

With aging or for people suffering from degenerative conditions like Alzheimer's Disease, the capacity to manage trust begins to decline. A revocable trust can help manage assets and money for older, mentally incapacitated people like those with Alzheimer's. If you cannot act as the Trustee of your trust or wish to continue working in that capacity, the trust enables you to name a Trustee you know and count on. You maintain control for as long as you can, after which you can delegate trust property and asset management to a family member or another person.

Reducing disputes and possible will disputes

Up to five years after the will is filed for probate, which is a relatively long period, a will may be contested. A revocable trust can lower the risk of family disputes by starting the clock when the trust is created rather than when the trustor dies. On top of that, challenging a trust will become more costly outside of the probate process.

Providing convenience

Identifying probate assets, their locations, and the fair market worth of each and every property is frequently the most challenging process in probate. Sometimes, assets are hidden in remote places, safes, safety deposit boxes, internet accounts, and digital assets. Gaining a good understanding of your possessions is difficult, let alone the assets of a deceased individual who is no longer around.

According to Louisiana federal law, all joint account holders, including spouses, must have their accounts frozen after passing away. Although there is an "allowance" for a surviving spouse, it is crucial to prevent blocked joint accounts.

Supporting your asset management

Banks and other financial organizations frequently doubt the authority of an agent appointed under a Power of Attorney, but they rarely question the authority of a Trustee. For this reason, rather than relying on a Power of Attorney, it may be wise to name someone as a Co-Trustee to assist you in managing assets held in trust.

Irrevocable trusts

A trust must have the beneficiary's consent to be altered or terminated. After transferring assets into the trust and setting up beneficiary designations, the settlor effectively forfeits all ownership rights to the trust assets.

Most of the conditions of an irrevocable trust that a settlor establishes cannot be altered by the settlor. Even if the settlor may still have some rights to benefit from the property in the trust, the settlor gives up some control rights over the assets the trust owns in exchange for not being regarded as the property's legal owner.

Benefits of irrevocable trusts

• Reduce or avoid paying taxes.
• Allow a settlor or other beneficiary to be eligible for the government.
• Payments are based on needs.
• When specific circumstances arise, protect property against division or distribution.
• Possibly suitable for a particular use.

Is it possible to modify an Irrevocable trust into a Revocable living trust?

People might hesitate to transfer property to an irrevocable trust because it is a fixed solution. What happens if the situation changes later on? Irrevocable trusts are arguably more difficult to revoke. A settler of an irrevocable trust may maintain some authority, and an irrevocable trust may be amended or revoked in certain situations.

A settler must expressly reserve the ability to amend a trust, making it revocable, for it to be considered revocable under Louisiana law. A trust's revocability or irrevocability will depend on the scope of the power reserved. The settlor may reserve some administration powers, such as the right to appoint a successor trustee, yet the trust may still be regarded as irreversible.

In the following situations, a court may also order to modify or terminate an irrevocable trust. The trust's goals would be compromised if it were kept the same.

The market worth of the trust's assets is less than $100,000, and the expense of administering the trust is considerable compared to its value. The trust's objectives are no longer feasible or legal.

Suppose the trust agreement does not expressly permit it. In that case, Louisiana law requires that it will not allow a trust to be modified or terminated by consent of all parties -settlers, trustees, and beneficiaries.

What are the categories of trust that can be created in Louisiana?

Once you have chosen the kind of trust you desire, you must select the trust category you will establish in your estate plan. The four most popular types of revocable and irrevocable trusts are as follows:

Inver Vivos/Living trusts

These trusts were established to function while the settlor was still alive. When the settlor passes away, these trusts are frequently utilized to avoid paying probate expenses by holding property that generates income for the beneficiary. Depending on the settlor's preferences, living trusts can be established as irrevocable or revocable.

Testamentary trust

It is established in a Will and, as a result, takes effect immediately upon the settlor's death without regard to the trustee's consent. Since these trusts are created after the settlor dies, they are irrevocable.

Special needs trusts

These trusts are designed to help a person or people with special needs without jeopardizing any of their current government benefits.

The beneficiary of this trust might be the same person who owns the property held in the trust, known as a first-party special needs trust. The owner of the property can also be a third party, in which case the beneficiary is not the owner of the property kept in the trust.

Pet trusts

Since the adoption of Louisiana Revised Statute 9:2263, the people of Louisiana have been able to create trusts for the benefit of their animals. These trusts, which can be made revocable or irrevocable, can be set up to care for your pet in the case of your passing while also providing for it in the same way a trust would for a human beneficiary.

How much may it cost you to set up a living trust in Louisiana?

Depending on how you create a living trust and handle probate/non-probate assets, it will cost you differently. One option is using an online form to build the trust document independently. You should budget about $300 for this. Additionally, you can hire legal counsel, which will likely cost you more than $1,000.

Self-made trust documents are less expensive, but there are risks involved in DIY estate preparation. You should seriously consider hiring a lawyer if you don't feel confident conducting the necessary research and paying close attention to all the nuances involved in effectively creating a living trust. Make sure the attorney is knowledgeable about trusts and not simply estate planning. Before you get your financial life managed and begin working together, pay special attention to the attorney's costs so that you know exactly how much you will pay.

Properties with transferable title documents

• Real estate, including cooperatives and condominiums.
• Automobiles, boats, RVs, and airplanes.
• Private banking accounts.
• Life insurance proceeds.
• Depository safes.
• Mutual funds, stocks, and stock accounts.
• Bonds, including U.S. government securities.
• Firms, associations, and limited partnerships.

How to set up a living trust in Louisiana

As per the trust laws, the six standard steps for creating a living trust in Louisiana are as follows:

Choose the kind of trust you desire

You should most likely use a single trust if you are single. A joint trust can be your best option if you're married. You and your spouse can use joint trusts to hold jointly held assets, such as homes and cars, and assets you and your spouse own.

Make a list of your assets

The trust is where you can keep most of your assets, including stocks, bonds, jewels, life insurance proceeds, and other family funds. The moment has come to obtain any necessary paperwork for this property, such as stock ownership certificates or vehicle titles.

Choose a trustee

You or another person can be designated as a trustee. But if you name yourself, you'll also have to pick a replacement trustee to take over once you pass away. This person will administer your trust and distribute its assets to your designated beneficiaries.

Create a trust document and sign it

Take the help of a lawyer or on your own. Sign the trust documents in front of witnesses and a notary public.

Set up the trust with your valuables inside

This process is known as trust funding. While you can do the papers yourself, it could be advantageous to work with a lawyer.

Louisiana estate tax with a living trust

A revocable living trust cannot help you to avoid estate taxes. A federal estate tax is imposed for estates worth more than $5 million. This estate tax can be avoided by setting up a marital or AB trust that transfers assets from one spouse to the surviving spouse, also referred to as a QTIP trust. The exemption is not applied when bequests are provided to a surviving spouse through a trust or will.

But the federal legislation for 2011 and 2012 also allows the spouse, whose federal estate tax exemption has not been used, the "portability" of the exemption. For at least 2011 and 2012, this portability applies to the estate of the surviving spouse of that dead spouse. You should know that a revocable living trust cannot shield assets from Medicaid.

Such things as annuities, IRAs, and 401k plans are categorized as "non-probate assets," which comprise a large portion of an estate's assets. There can be greater federal income taxes if a trust is named as the beneficiary of such accounts. This is a trap for the unsuspecting. The trust's architecture, precisely how income from its assets is distributed, will determine the income tax implications.

Fortunately, Louisiana has neither an estate tax nor an inheritance tax. Only estates valued at $12.92 million, or $25.84 million for couples, are subject to the federal estate tax.