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A revocable living trust (or “revocable trust) is a valuable tool for estate planning. A revocable trust is a legal agreement about passing assets, such as a home, from one person to another. The term “revocable” means the agreement can be ended or amended by the owner of the assets while they are still living. 

While there are many advantages to a revocable trust, it may not be the best method to protect your assets and ensure your beneficiaries receive all they are entitled to in the most efficient way. 

6 Myths About Revocable Living Trusts in Louisiana

You’ve heard the saying about knowing “just enough information to be dangerous.” When it comes to planning your estate, having only part of the information you need can be disastrous. There are many misconceptions about how a revocable trust works and the advantages and disadvantages of this legal agreement. 

Myth 1: There Is No Probate with a Revocable Living Trust

Revocable trusts do not circumvent Louisiana probate laws. Regardless of the existence of a revocable trust, Louisiana law requires that any will of a deceased person be filed with the Clerk of Court’s office. Assets that are in a trust must still be appraised. Stocks and other properties must be valued both for taxation purposes and to satisfy all other stipulations of the will. Further, Louisiana laws regarding forced heirship require some form or proceeding be it a simple affidavit or a formal succession filing to establish to satisfy the forced heirship requirements.

Myth 2: A Revocable Living Trust Reduces Taxes

The first question that should come to mind with this statement is, “Which taxes?” The state of Louisiana ended their standalone inheritance taxes in 2004, choosing instead to essentially unify the state exemption with the federal estate tax exemption. Meaning that until Federal Estate taxes are owed, there are no State taxes due to Louisiana. A trust is not needed for these exemptions.

There is some confusion that a trust is needed to qualify for the $13.9 million Federal Estate Tax exemption, but this is not true. You may obtain that benefit without having a trust or a will. 

Myth 3: A Revocable Trust Grants Immediate Access to Assets, but a Will Does Not

Beneficiaries can receive their inheritance quickly with or without a revocable trust. Louisiana’s “independent administration law” allows executors to dispose of assets without going through the sometimes lengthy process of obtaining authority from the court. This means an executive can manage succession assets quickly with or without a revocable trust. Further, simplifying the process, Louisiana has laws that allow for the distribution of estate assets without the necessity of even appointing an administrator, when certain conditions are met. This process can often be accomplished in a matter of weeks, and often for less than it may cost to establish and manage a Revocable Trust/

Myth 4: A Revocable Living Trust Costs Less Than a Will

The costs involved with estate planning depend on what you want to accomplish. Wills can be simple or complex, and those complexities are reflected in the cost. Setting up a living trust may not always be the most economical option and not necessarily less expensive than a will, depending on individual needs. With the Trust you must pay to not only establish the trust, but for the transfer of title of all of the assets into the trust. Then after the death of the Grantor the assets must be transferred again, at additional cost.

Myth 5: A Revocable Trust Cannot Be Contested Like a Will

Louisiana law requires that any person establishing a will or a trust have the mental capacity to enter into a legal contract. If it is believed that fraud, duress, or mental impairment was involved, a revocable living trust may be contested and overturned just as a will can be. 

Myth 6: A Trust Protects All Assets

There are no shortcuts to estate planning. Every decision should be made based on accurate legal information.

Some assets, such as annuities, IRAs, and life insurance proceeds, are non-probate assets. They cannot be transferred into a revocable trust due to negative tax consequences. 

In addition, any assets transferred to the trust during the owner’s lifetime are not protected from creditors and would still be subject to claims after their death. 

Learn More at Kallio Law Firm

Kallio Law Firm in Prairieville, and serving all of Ascension Parish and Baton Rouge, LA, specializes in all forms of estate planning, including wills, succession, and revocable trusts. Protecting your assets can be confusing, but the experts at Kallio Law Firm are here to help. Contact our Prairieville office to schedule a consultation and take the worry out of estate planning.