Baton Rouge estate planning lawyer

Louisiana Trust Code Rules Regarding Shifting a Trust Beneficiary's Interest in Principal

Many people who put their estate plan in place do not understand the rules regarding the shifting of a trust beneficiary's interest in principal.

Occasionally, people who are putting their estate legal program in order want to make a bequest, in trust, for others - often grandchildren. Since the grandchildren are often young and immature, the grandparents often want to put stipulations on the bequest.

A common request goes something like, "I want to leave $100,000 to my grandchild when I die, but I want it to be in a trust. And if my grandchild doesn't go to college, or does drugs, or goes to jail, then that money will go back to other people I designate."

Well, you can certainly leave $100,000 in trust for another, but there are restrictions on your ability to shift that trust principal to someone else. One such restriction in the Louisiana Trust Code provides that the interest of a principal beneficiary is acquired immediately upon the creation of the trust. Once the grandparent passes away, the trust for the grandchild is created and that trust is for the grandchild only while the grandchild is alive.

What you CAN control is when the grandchild gets the principal. You could give the trustee the discretion regarding distributions of principal to the grandchild. So if the grandchild goes to jail, the trustee could exercise his or her discretion and perhaps never distribute the principal to the grandchild while the grandchild is alive.

Other controls you have include certain powers to direct principal when the grandchild dies. if the grandchild dies with descendants, you can state in the trust that the principal vests in one or more of his descendants. If the grandchild dies without descendants, you can direct who the principal vests in upon the grandchild's death.

And if you do not direct where the principal vests upon the beneficiary's death, then his interest vests in his heirs or legatees, subject to the terms of the trust.

In other words, get good legal help when you are leave a bequest, either through your last will and testament or your revocable living trust, to individuals (such as grandchildren) who you are unsure how they will turn out from a maturity standpoint. Failing to comply with the rules regarding the shifting of a beneficiary's interest in principal can cause all kinds of legal problems for your descendants in the future.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Banks and Brokerage Firms: We Hardly Use Letters Testamentary These Days

After a Louisiana resident passes away, a surviving loved one often goes to the deceased's bank, credit union, or brokerage firm, in an effort to settle the estate of their loved one. The financial institution promptly responds by saying something like, "Your loved one's accounts at this financial institution are all frozen. You must bring back "Letters Testamentary" or "Letters of Administration" in order to gain access to funds.

These days, the financial institutions are asking for the wrong things. They should be requesting "Letters of Independent Executorship" or "Letters of Independent Administration."

Since 2001, Louisiana has authorized the independent administration of estates - less court supervision. Virtually all Wills written since 2001 authorize this procedure. And if a Will does not authorize it, then the heirs can agree to operate under this independent administration procedure.

After a death, when the family gets the executor confirmed, and if the executor is acting as an independent executor (which is the case in an overwhelming majority of Successions), the court does not issue "Letters Testamentary." The court issues "Letters of Independent Executorship."

So the bank requests Letters Testamentary, and then we have to tell them that we will not give them what the bank is requesting. We will give them Letters of Independent Executorship.

It would be easier on everyone if the financial institution tells the survivors of its clients and customers that they can bring in the Letters of Independent Executorship to gain access to the funds of the deceased.

To some, this may seem to be a trivial matter. But when we deal with so many confused survivors, anything the legal and financial industries can do to help those in need at a difficult time would make everyone's job easier. Just my two cents.

This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Louisiana Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450

Louisiana Parents Want Different Allocation to Their Four Children

Met with a couple in our Baton Rouge estate planning office today. They lived in Gonzales. They has a number of different rental properties throughout Ascension Parish and East Baton Rouge Parish and Livingston Parish.

The couple has four children. Their son works in their rental property business and handles all of the books for them. Their second oldest child has had substance abuse problems and has caused the family lots of grief.

One of the things that they wanted to accomplish was to set up an estate legal program so that after both the husband and the wife died, that 60% of their estate would go to their son in their rental business, and the child who had the substance abuse problems would only get 5% of their estate, and the 5% would remain in the trust until the child proved that he was clean and sober to his three siblings.

The couple feared that if their drug-abusing child got her hands on any money when the couple died, that the money would simply be used to support their daughter's drug habits. So, this was a scenario where we helped a couple in several different ways:

  1. The drug-abusing child will not get a lump sum handed to her. She will have to prove that she is clean and sober before she gets a nickel;
  2. They made the proper allocations to the four children to reflect how much certain children have helped them over the years;
  3. Their estates will not have to go through the Louisiana probates when they die because certain assets will be held in trust, bypassing the probate process;
  4. They won't have to sell any of their rental property if they go into a nursing home since they are setting their legal affairs up in a way so that their "Countable Resources" for Long Term Care Medicaid purposes are minimized; and
  5. Their responsible son who helps them manage and account for their rental property will have the authority to manage things if the couple becomes incapacitated or when they die.

If you live in Louisiana, whether it's in Metairie, Covington, Baton Rouge, Lafayette, Lake Charles, Monroe, Alexandria, or Shreveport, and you have particular family circumstances and you want to make sure that you have a simple but thorough estate legal plan to preserve all that you've worked for, give our office a call at 866-491-3884 to start a conversation with an estate planning attorney who - I guarantee - will put your mind at ease.

Paul Rabalais