Baton Rouge trust attorney

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

Louisiana Family Supportive After Parent Dies Intestate Requiring Probate

I was contacted by a family recently that had a number of estate planning and administration issues that needed to be addressed.

Mom had died unexpectedly a few years ago. Mom died intestate - which means she had no Will or other estate planning legal documents in place when she died. Mom and Dad had accumulated a fairly significant estate by the time she passed away - including homes, mutual funds, stock, bank accounts, vehicles, and other assets.

Dad is planning on getting married again. Normally, this causes problems between the children of the first marriage and the new step-mom - but not here.

The children were super-supportive of their father. They said, "Look Dad, you raised us, bought us cars, paid for our college education, and you've been a great father. You and Mom don't owe us anything. We want you to have it."

Now that's support from children back to their father! The children realized that they could kick Dad out of his house on the day that he marries Step-Mom - but the kids are better than that.

But we still have legal work to take care of. We will complete Mom's Succession. And then after that, the kids will sign legal documents donating their share of their inheritance from Mom back to Dad. Dad will wind up being the 100% owner of everything. 

Dad is now establishing a new legal plan to support his new wife and his children the right way, and making things easy for them to inherit in the future.

If you live in Louisiana, and are in a situation like this, and would like to find out how easy it is to get all of this straight (and how much of a mess it will be if you don't address it), give my office a call at 866-491-3884, and we'll have a discussion about the easiest way to get all of it straight.