Many consumers are executing Revocable Living Trusts. They are being sold on this product on the promise to avoid a succession and probate.

Revocable Living Trusts do help the person avoid succession and probate. But, that’s all it does and this benefit may not be as valuable as one might initially think.

Some Revocable Living Trusts are expensive and may costs as much as a small uncontested non problematic succession. So the financial benefit that you get, may not be as great as you think.

What is important to remember is what Revocable Living Trusts do not do! Revocable Living Trusts are revocable. This means you can remove any property you put into that trust at any time.

Since you can remove the property from the trust, there is no asset protection. If you owe money, your creditors will be able to seize whatever assets you placed into the trust.

Also, you obtain no tax advantage to creating a Revocable Living Trust. You will continue to pay your taxes the same way you always have paid them.

Finally, placing property in a Revocable Living Trust does not shelter it from government entities for you to pay for your long term nursing home care. Medicaid and the Veteran’s Administration will count all property placed into a Revocable Living Trust just like you own it. There is a five (5) year look back period for Medicaid and there may also soon be a look back period with the Veteran’s Administration. You may be missing out on an opportunity to shelter your assets while you are healthy by placing your assets into a Revocable Living Trust.

To obtain additional information on legal and innovative estate planning strategies, you should always consult an experienced estate planning attorney. Kent S. DeJean

Do I need an appraisal in a Louisiana succession?

Guessing as to the valuation of real estate in Louisiana is not a good idea for several reasons.

  • Heirs and legatees are required to file a detailed descriptive list in the succession proceedings. In the detailed descriptive list, the heirs and legatees take an oath that the list is complete and accurate. Therefore, valuations must be accurate. If the heirs and legatees knowingly give inaccurate valuations of assets, they may be guilty of contempt.
  • Valuing real estate too low can also have adverse tax consequences. Should the value of the real estate be too low and later sold at a higher accurate value, the heirs and legatees may be subject to increased capital gains taxes. The rate of taxation for capital gains is significant.

If you are unsure as to the value of real estate, it is recommended that you spend more time, effort and money on getting an appraisal. The relatively small amount of money that you spend on an appraisal may pale in comparison to what you may owe in capital gains taxes if you are wrong.

Should you have any questions about succession, you should consult an experienced estate planning attorney.

Kent S. DeJean

Living Trusts: Not Always Appropriate

While a living trust can be a useful tool, it may not be appropriate for every circumstance.  Mr. Pete Losavio provides for us a few factors useful in determining when a living trust is not the way to go:

<<Living trusts are a good device for avoiding probate, or as it is called in Louisiana, succession.  However, living trusts may not always be appropriate for your situation.

Living trusts are not a good asset protection device.  In fact, it can be detrimental to asset protection.  For example, if your home is transferred into a living trust and you take bankruptcy, then the home no longer has the exemptions because it is no longer considered to be owned by the debtor in the bankruptcy.

A living trust is tax neutral.  There is no tax advantage to the living trust.

Living trusts may be detrimental to affording long term care. Furthermore, if the settlor, or creator, of the living trust transfers his or her house into the trust and later becomes ill and needs to qualify for Medicaid, the house is no longer exempt under the Medicaid rules and is considered a resource, thus that person cannot qualify for Medicaid.

While the living trust may not be a good device, the irrevocable trust is the appropriate device to protect assets.  Not all irrevocable trusts will protect in all situations.  If the person is interested in protecting their assets from Medicaid, then the trust needs to be an irrevocable Medicaid protection trust which is more complex trust than the normal asset protection trust.>>


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