Louisiana Revocable Living Trust

Living Trusts and Income Tax

As we discuss an estate planning program with our clients, some of our clients that they would like to arrange their estate to avoid the court-supervised probate estate administration at their death, but they are concerned about how setting up a Revocable Living Trust might affect their income tax situation during their lifetime.

When you create a Revocable Living Trust, you will be what's referred to as the "Grantor" or "Settlor." You can amend or revoke the trust at anytime, and you are entiled to receive all of the income that the trust assets produce during your lifetime.

While there are many different types of trusts, this type is arranged so that you are still taxed on all income earned by the trust assets. You continue to use your Social Security Number on all trust bank and investment accounts. The trust does not need its own Tax Identification Number. As long as you live, all of the income is reported on your own personal income tax return, so you won't need to file a separate trust tax return.

Some people like that their trust does not complicate or change their tax status, but the assets in the trust will avoid the Louisiana court-supervised probate estate administration upon their death.

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Secrets Every Louisiana Couple Should Know - Is It Best to Have One Living Trust or Two?

We work with many married couples throughout Louisiana. Every once in a while we work with a married couple and their goal is to avoid probate and sometimes they ask the question, "Should we have one trust or should we have two trusts?"

Quite frankly, the answer is that most married couples, particularly the traditional families (a married couple that have children together), typically have one trust. They have the same beneficiaries so after both spouses pass away typically their children are going to share in the trust assets.

However, there are many married couples that meet later in life, they already have children, and perhaps they even signed a marriage contract prior to their marriage.  They do this because they wanted to make sure that all of the assets remain separate and each spouse has different heirs. Perhaps they want to provide for their spouse but ultimately each spouse wants to provide for and leave their assets to their perspective child or children. Often times in those cases we'll do two trusts, one for each spouse. Each spouse will get their own portfolio with all of the trusts, and the wills, and powers of attorney, and all of the other supporting documents that are included, all of the instructions for the people who are going to be in charge when you pass away. All that information goes in one place.

So be aware, married couples, if your intent is to avoid probate with a trust, you have a decision to make, whether you want to have one trust or two. Typically it's one, but when things are kept separate, it's often two. Give me a call if you would like to gain peace of mind by taking the first step to get your estate plan in order.

Lafayette Family Makes It Easy To Leave Home To Child With All Else For Their Children Equally

Helped a nice couple recently. They lived outside of Lafayette, Louisiana. They had four main estate planning goals: (1) Keep the surviving spouse in control of everything; (2) Make sure that any of their four children could handle future financial and medical decisions should the parents become incapable; (3) Make sure that one of their children (who did not own a home while their other three children all did well and had nice homes) inherits their home; and (4) Make sure that all four children work together after the parents die to sell their commercial property and divide up the proceeds as well as divide equally their stock investments and bank accounts that they have.

So, we will be helping them implement their estate legal program so that when one of them dies, the surviving spouse will not have to access the legal system to access their money or property. Probate will not be necessary when either one of them dies. Their revocable living trust will specifically provide that when they die, their home is to be transferred to their child. Their trust further stipulates that their four children will be the Successor Co-Trustees after both parents die so that the children will have immediate access and authority to work together to divide remaining assets equally and fairly - keeping sibling relationships strong, and keeping the government out of the settlement of their estate.

If you live in Louisiana and would like to start a conversation about setting up an estate legal program for you and your family, call Rabalais Estate Planning at 866-491-3884.

How To Keep A Child From Blowing A Large Inheritance

I was working with a Lafayette, Louisiana couple recently. They had one child - a daughter. The couple had worked hard to build a business together while they were working. They were successful - build an estate that consisted of millions of dollars of net worth.

They acknowledged to me that they had spoiled their daughter and enabled her to get used to a lifestyle that was "spend now - worry about paying for it later." They feared that if they had an estate planning program that dumped these millions into the daughter's lap, that it would all be gone six months later.

The couple has three grandchildren from this daughter and the couple is really worried about the future well-being of these grandchildren. They were looking for guidance from me on how they should leave their estate to their family. I knew I did not want to tell them what to do - I wanted to give them options and put them in a position where they could make the best informed decisions for their family.

We discussed all of their options. Here's what they came up with. After couple both pass away, they will leave half of their estate for the benefit of their daughter, and half of their estate for the benefit of their three grandchildren. And they were specific about how they were leaving their estate to their descendants.

  1. Amount for daughter. The daughter will not get her inheritance in a lump sum. She will get an annual distribution for each of the five years after the couple is gone. Then, she will receive the remainder of her share in five year intervals. This will prevent the daughter from blowing her inheritance all at once.
  2. Amount for grandchildren. After the couple dies, the amount for the grandchildren will be held in trust. A trusted professional will serve as the trustee, spending the money as needed for the education and well-being of the grandchildren. The grandchildren will get their inheritance in stages until the last distribution at age 50.
  3. Revocable Living Trust. The couple does not want their to be court proceedings when each of them dies, so we are setting up their estate in a revocable living trust so the typical delays and costs associated with probate are avoided when they die.

The decision of what to do with this couple's estate had been bothering them for quite some time. Now they know that their daughter will not be able to blow her inheritance, and they know that they have provided that their grandchildren's education will be paid for, and their grandchildren will be able to get a much-needed head start financially on their lives. They were also pleased to know that, indirectly, they were also providing for their future great-grandchildren that do not yet exist.