A trust is a legal document by which you give ownership and control of certain of your assets over to a trustee, but on the condition that the trustee must give those assets to your designated beneficiary according to the instructions you put in the trust document. The trust document thus acts as both a donation, and a set of management instructions.
Trusts are like the Swiss Army knife of legal documents, and can be used for numerous purposes:
(1) To allow your heirs to inherit from you according to your wishes without the inconvenience of having to probate your Will. Trusts are generally effective for this purpose. You can create a trust that is revocable during your lifetime and which sets yourself up as the initial trustee and the primary beneficiary, but then upon your death becomes irrevocable, appoints a new trustee, and makes your heirs the beneficiaries. In deciding whether or not to create such a trust, you will have to balance the inconvenience to your heirs of having to go through the probate process (in my opinion, probate is not that onerous in Louisiana) against the inconvenience to you of having to donate and re-title all of your immovable assets to make this effective.
(2) To avoid the public record of a probated Will. When your heirs probate your Will, it becomes a public record. If your trust directly owns immovable property, you have to record an extract of trust – so much of the information becomes public record. However, if you properly combine LLC ownership of the immovable property with trust ownership of the LLC, you can keep the names of your trustee and individual beneficiaries private.
(3) To create what is in effect a multi-person Will. Your trust can be created by multiple people (most often, spouses will create the trust together) and contain numerous provisions taking into account what happens under different scenarios where the parties’ order of death changes.
(4) To protect an heir who is incapable (for whatever reason) of responsibly managing finances from him or her self. You can create a spendthrift trust that will ensure your loved one is taken care of, but protect him or her from receiving more money at one time than he or she can responsibly handle. A spendthrift trust can even protect your loved one from their creditors.
(5) To take assets out of your name so that you will qualify for Medicaid – an irrevocable trust can be effective for this purpose when done properly in accordance with the Louisiana Medicaid eligibility guidelines. There are a lot of things you should take into consideration before adopting this strategy, however.
There are even more purposes that trusts can serve for you depending on your circumstances. If we assist you with your estate plan, we will discuss trust options that will best meet your wishes and serve the interests of you and your loved ones given your circumstances.