In Louisiana, trusts have been used sparingly. Common uses for trusts in Louisiana have included:
· Testamentary trusts for young children used if the parents die before the children are mature enough to handle an inheritance;
· Revocable Living Trusts are used occasionally by those wishing to avoid probate;
· The Louisiana “usufruct” has taken the place of the “credit shelter trust” used in all of the other states to ensure that both spouses utilize their estate tax exemption;
· Irrevocable “Crummey” trusts are not used as much since gifting to children’s trusts has less appeal now that the estate tax exemption has increased from $600,000 to $3,500,000; and
· Informed middle class families often transfer assets to carefully drafted trusts to ensure Medicaid eligibility and protect one’s estate from rising nursing home costs.
But there is another type of trust that most attorneys and advisors overlook – or perhaps they do not know that this type of planning exists. In our office, we call it the Children’s Inheritance Trust. In Louisiana, there are limited benefits to you setting up a trust for yourself and putting your own assets into it (commonly called a “self-settled” trust). However, there can be tremendous benefits to your children if you set up your estate plan so that when you die, your assets go directly into your children’s special trust that you set up for them. The following table shows the benefits that your children can recognize if you set up your estate plan so that instead of your assets going directly into your children’s name (an outright bequest), your estate goes into separate trusts for each of your children. Your children can maintain control of their trust for their lifetime, and recognize the following benefits:
|
Children’s Inheritance Protected: |
Outright Bequest |
Bequest to Children’s Inheritance Trust |
|
From Child’s Divorce |
No |
Yes |
|
From Child’s Lawsuits |
No |
Yes |
|
For Grandchildren When Child Dies |
No |
Yes |
|
From Probate at Your Death |
No |
Yes |
|
From Estate Tax When Your Child Dies |
No |
Yes |
|
From Your Child’s Bankruptcy |
No |
Yes |
|
From Probate When Child Dies |
No |
Yes |
|
From Child’s Nursing Home Expenses |
No |
Yes |
The biggest potential drain on your children’s inheritance will likely be taxes, divorce, lawsuits, and long term care expenses. What if you could leave them an inheritance that was protected from these all-too-often life changing events.
If you want to know how to protect your children’s inheritance, call our office at 225-329-2450 and schedule a no-cost meeting with me, or send me an email at paul@rabalaislaw.com. Make sure you put “Protect Children’s Inheritance” in the Subject Line. Don’t procrastinate on this one. Your children’s entire financial future is at stake!
Paul Rabalais
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