The popularity of families making it easy to pass 100% of their estate to their loved ones through a revocable living trust is rapidly increasing, despite what traditional probate lawyers say about the benefits of going through the expensive, time-consuming, and aggravating court-controlled probate or Succession procedure.
A question came up recently about what must happen when a Louisiana married couple has a revocable living trust, and one of them dies. Well, what happens next depends in large part upon the provisions of the revocable living trust instrument.
Due to old estate tax laws, and due to Louisiana forced heirship laws, some couples set up their trust so that when the first spouse dies (let's say, the husband), then that spouse's share of the trust becomes irrevocable, and the surviving spouse's share of the trust remains revocable.
For example, John and Jane Doe have $2 million of community property in their trust when John dies. Many trusts are established so that the trust then gets split into two trusts, the John Trust and the Jane Trust. $1 million of assets would go into each trust. Jane would be the trustee and income beneficiary of the John Trust, and she perhaps could invade or spend John Trust assets for her health, education, maintenance, or support. Jane cannot change the ultimate disposition of the John Trust. When Jane later dies, the John Trust assets must be distributed in accordance with the terms of the John Trust, which Jane cannot change.
When established this way, the Louisiana Forced Heirship rules are satisfied, John's heirs are protected from Jane making a bad or influenced decision to disinherit John's heirs, and, typically, the assets of the John Trust are excluded from the estate of Jane for federal estate tax purposes when Jane later dies.
Each and every estate planning decision you make has consequences that you may not be aware of, so it's important that you work with an estate planning attorney who has decades of experience and has worked with many others who have circumstances similar to yours. If you mess this up, you may be harming your family for generations to come.