Estate planning can be a difficult task – or many individual tasks. We’ve discussed the need for wills and powers of attorney, but there’s another vehicle for protecting your assets and your legacy for your heirs – a trust, or trusts.

But how do you determine whether a trust is the right thing for your family? Some general guidelines:

• If you have a high net worth;
• If you own significant real estate;
• If you want to keep your assets and arrangements private;
• If you have minor children;
• If one or more of your heirs will need long-term care; or
• If you have multiple beneficiaries and specific goals as to the protection of each

The answer might be yes.

Wills are great, and absolutely necessary, but any will has to be validated by the probate court. Trusts, as a general rule, bypass this oversight and its attendant costs (the most common exception is a Testamentary Trust, which is created within the will itself).

However, be aware that trusts come with their own set of costs – your estate attorney’s fees, any payments to the trustee, the fees for filing the trust’s tax returns, and income tax incurred by the trust, etc. It’s a very good idea to identify the specific goals of your trust before your consult your estate attorney.

Identifying those goals can also point you toward the right kind of trust for your purpose(s).

Some types of trust commonly used in estate planning are:

• Revocable Living Trust: Such a trust is owned by you during your lifetime. You can manage the assets it holds just as you manage assets held in an investment account – buy and sell them, withdraw them, add to them, and change your directions for distributions to your heirs. One potential downside to a revocable trust is that, since the assets remain yours and under your own control, these assets will be available to creditors for collection of any debts. This is not necessarily a great idea in many circumstances in the State of Louisiana.
• Irrevocable Trust: Absent a court order, generally speaking these trusts cannot be changed once they have been placed in force. The assets you designate will transfer from your own ownership to the trust’s; you cannot alter the terms. However, since they are no longer yours, any assets held in an irrevocable trust are shielded from your creditors and not included in your estate.
• Family Trusts: These can be revocable or irrevocable and are designed to protect your assets in the interests of your family members.
• “AB” Trust: This is really two trusts, but they are usually created together. The “A” trust, which is a Marital Trust, designed to protect your surviving spouse for his or her lifetime. Your spouse must be the sole beneficiary of such a trust for his or her lifetime, though s/he may, after your death, distribute some or all of the trust’s assets as s/he sees fit. The trust’s designated assets pass to your spouse tax-free, as you can pass any or all of your assets to your spouse without any incurred income tax liabilities. The “B” Trust would benefit your non-spousal heirs – and you can place assets into it shielded from income tax ramifications up to the limit of your estate exemption. The remainder of your assets can pass into the “A” trust for your spouse. This can be further complicated by allowing your spouse the use of the income of certain assets for their lifetime, which is called a usufruct.

There are other types of trusts, which may or may not fit your needs, such as an Irrevocable Life Insurance Trust (ILIT) or Dynasty Trust.

Whether you should set up a trust, and if so, what type of trust is best, depends on you, your financial picture, your goals for your legacy, your family’s goals, needs, and wants. No two families are the same – and one size never fits all.

That’s why estate planning is a deeply personal matter. We understand this. Come consult with our advisors, and let our caring experts guide you through a plan to protect your hard-earned assets for your loved ones – one which aligns with your individual situation.

Please click here to email us directly – let us know how we can help you.

Until next time –

Peace,

Eric