If you live in Louisiana and are creating an estate plan, you may wonder whether one or more trusts would be appropriate in your situation. Talking about trusts can be confusing sometimes because they may be referred to under different names. Several different types of trust might also fall under a single larger category of trusts, such as revocable or irrevocable trusts.
One type of trust is a living trust. You create this while you are alive, and you can change it or revoke it any time. This offers a number of advantages, such as allowing the assets in the trust to be easily passed without going through probate, protection in case you become incapacitated, and privacy. However, there are limitations, such as a lack of protection against creditors. A living trust becomes irrevocable upon your death.
You use a will to create a testamentary trust, meaning that like the other things in your will, it goes into effect on your death. A testamentary trust may protect assets for a loved one with special needs or might be useful in a blended family to help ensure that children from a previous marriage receive some assets.
Other types of trusts
There are several other common types of trusts used in estate planning. An irrevocable life insurance trust can help a wealthy family avoid or reduce estate tax owed. The estate tax exemption is more than $11 million for an individual and more than $22 million for couples, but the exemption may not be available for a non-citizen spouse. A qualified domestic trust could help solve this issue. Finally, a charitable remainder trust can be used to avoid capital gains tax on appreciated assets.
You may want to discuss your needs and the type of trust that might be appropriate in your situation with an attorney. Since your assets or family situation may change over time, it can be particularly important to make sure that an irrevocable trust is the right choice as it generally cannot be altered.