TESTAMENTARY AND LIVING TRUSTS
Trusts are an essential part of estate planning. Trusts are an ancient concept that originated in the Old World as a business entity. Trusts predate and eventually evolved into corporations, partnerships, and limited liability companies. Trusts are commonly used by individuals of all income and asset levels (not just the wealthy) to achieve a great number of objectives. A Trust can be a highly complex document, so it is wise to seek legal counsel from an experienced Louisiana trust attorney.
What Is A Trust?
A Trust is a private legal document or agreement that you create. It is a separate legal entity, like a corporations, except the existence of a Trust is not of public record, so it’s totally private.
The person who creates a Trust is referred to as a Settlor.
Trusts hold assets for you or for the benefit of others, who are referred to as Beneficiaries.
Assets inside a trust are managed by a Trustee who has legal responsibility for managing and overseeing trust proceeds in accordance with your wishes. The trust stipulates how your assets should be managed, and how, when and to whom your assets will be distributed.
There are only two types of trusts: (1) Testamentary Trusts; and (2) Living Trusts.
What is a Testamentary Trust?
A Testamentary Trust is a Trust that is created as part of a Last Will and Testament. A Testamentary Trust is created when the Will becomes effective at death. Until such time, a Testamentary Trust does not exist and provides no benefit to the creator of the Testamentary Trust.
What is a Living Trust?
What Is The Purpose Of A Trust?
Many people think only the wealthy can benefit from trusts. But this is simply not true. Trusts are highly flexible and can provide for an almost unlimited combination of needs, circumstances and objectives.
Because they can be designed to satisfy such specific needs and circumstances, trusts can address the concerns and objectives of most people. These include:
- Business owners and other individuals who wish their financial affairs to be private
Unlike wills, trusts can hide assets and their disposition from public scrutiny armed with information from a probate proceeding. For example, a competitor might be able to force the sale of the decedent’s business at a below-market price.
- Owners of highly appreciated assets
When highly appreciated assets are sold, a large chunk of the gain may go to taxes. A trust can shelter property from taxes on income and capital gain and thus avoid the tax bite.
Setting up a charitable remainder trust (CRT) provides the grantor with income for life and creates charitable tax deductions.
Trusts offer a method of providing regular income to dependents and the possibility of tax savings for you. They also offer control through the choice of mandatory or discretionary payments, as you may specify to suit the dependents’ changing support, educational and medical needs.
In addition, trusts can provide for the orderly passage of one’s property without the expense, delay, or publicity of probate, and for professional investment management for family members who lack this skill.
- Retirees, widows, widowers
A trust can provide a monthly check, freedom from making investment decisions and the burden of bookkeeping details. It can also provide for the management of financial affairs in the event of illness or incapacitation, and tax savings on future gifts to charity.
- Spouses in second marriages
A trust can protect the interests of children from a previous marriage, and spare friends and family members from legal conflicts.
- Parents of children with special needs
Trusts can ensure that children and others with special needs will have their financial concerns properly addressed.
- Individuals concerned about becoming ill
Trusts ensure that their financial affairs will be handled properly. They also handle the obligation of naming a guardian or conservator to oversee these responsibilities.
- Unmarried couples and close friends
A trust can provide a “significant other” with income for life while keeping assets in the grantor’s family. Upon the death of the loved one, assets can revert back to a family member or to a specific charity.
- Individuals who need help in handling their finances
Trusts can manage the assets and oversee all responsibilities regarding record-keeping and tax preparation for those unwilling or incapable of handling their financial affairs.
Do I Need a Trust?
Trusts are very useful estate planning tools. Whether you need a trust will depend on your particular circumstances, but we regularly utilize trusts to address the following concerns:
- Fear of lawsuits
- Protecting assets from long-term care costs and avoiding nursing home poverty
- Maintaining privacy
- Maintaining control of assets
- Minimizing dispute in the event of actual or potential family discord
- Avoiding the cost and administrative burden of probate
- Protecting legacies from future failed marriages or manipulative in-laws
- Providing restrictions upon the remarriage of a spouse
- Managing financial affairs of a family member
- Preserving the characterization of assets in a second, third, fourth..marriage
- Federal estate tax planning
- Special needs planning
Other Useful Articles
- A Bundle of Magic Sticks (Beneficiary-Controlled Trusts Now Authorized in Louisiana
- Naming A Trustee May Be One of the Most Important Decisions of Your Life
- Every Word Counts (IRS Busts Discretionary Support Trust For Child
Protecting Everything You Own and Everyone You Love…
Whether you need a simple trust, or require higher level estate planning to attain more complicated goals, we provide comprehensive, experienced representation. Properly planning and protecting your estate is a necessary step to protect for your family or loved ones in the event of death or incapacity. If you have questions about Trusts, or any other estate planning topics, please contact our office to schedule a free consultation, or use the link below to schedule your Free 15-Minute Call with an Estate Planning Attorney.
J. Graves Theus, Jr. is the founding member of Theus Law Offices, and a fourth generation Louisiana lawyer with deep roots in the community. He received an LL.M. in Tax Law from Boston University School of Law in 1997, after graduating, cum laude, from Gonzaga University School of Law in 1996. Graves is licened to practice law in three states: Louisiana, Washington, and Alaska (a domestic asset protection jurisdiction). He is certified by the Louisiana State Board of Legal Specialization as a Specialist in Tax Law, as well as Estate Planning and Administration, and is an approved title agent. Graves is also accredited by the Veterans Administration to assist veterans with their pension claims.