“Even a breach of contract has a legal remedy. But a breach of trust…has no remedy.” -Rhea
What is a Trust?
“Trust” is a word that holds a lot of meaning: trust in family, trust in friends, even trust in self. To trust another person is to be able to rely on them in times of need, regardless of the circumstances. In a similar way, legal living trusts are created when the property of one person is transferred to the care of a third-party for the benefit of another person. The legal system and the person who created the trust is “trusting” that third-party with the care of their property, regardless of the circumstance they find themselves in. The legal jargon of trusts in Louisiana can be tricky but breaking down the definitions of each aspect can help you better understand what living trusts are and how it can help you.
Living trusts, according to the Louisiana Trust Code, is defined as “the relationship resulting from the transfer of title property from one person to another person to be administered by him as a fiduciary for the benefit of another.”
The settlor, according to the Louisiana Trust Code, is defined as “a person who creates a trust.” The trust deed is the legal document created based on this relationship/agreement.
The trustee, according to the Louisiana Trust Code, is defined as “a person to whom title to the trust property is transferred to be administered by him as a fiduciary.” Commonly, the trustee/s and the grantor/s are the same party. For specificity, the grantor¸ as defined by the Louisiana Title Real Estate Dictionary is “the party in the deed who is the seller or the giver.”
The beneficiary, according to the Louisiana Trust Code, is defined as “a person for whose benefit the trust is created and may be a natural person, corporation, partnership, or other legal entity having the capacity to receive property. A trustee of a trust, in his capacity of trustee, can be the beneficiary of another trust. Neither the heir, legatee, or assignee of a designated beneficiary, nor a beneficiary by reason of a substitution under Subpart B of Part III of this Chapter, is considered a beneficiary for the purpose of fixing the maximum allowable term of the trust.” Basically, the beneficiary is the one that benefits from the creation and execution of the trust.
Revocable vs. Irrevocable Trusts
There are several types of trusts in Louisiana, and two of those are revocable and irrevocable trusts. As their names suggest, one is revocable, and one is not.
Revocable trusts are trusts in which the grantor reserves the right to modify, amend, or revoke the trust in whole or in parts. The grantor in this case can change the terms of the trust at any time. They can add/remove beneficiaries and modify stipulations of the assets within the trust. The settlor may also delegate the power to revoke, but only if explicitly stated in the trust or by power of attorney. For revocable trusts, upon the death of the grantor, the trust then becomes irrevocable.
A revocable trust can serve many purposes. Revocable trusts provide a pathway to manage the settlor’s/settlors’ assets during their life and after death. They maintain a degree of privacy during this time. They can also use this trust to avoid probate (the legal proving of the will upon death) and possibly to avoid income tax complications. Revocable trusts may also apply to a joint will by spouses.
Irrevocable trusts are trusts in which the grantor has no right to modify, amend, nor revoke the trust in whole nor in parts. Most trusts default as irrevocable, unless specific rights to revoke are expressed.
An irrevocable trust can also serve many of the same purposes as the revocable trust. In addition to those benefits, irrevocable trusts can help achieve asset protection for the client. They also allow for full control over the assets during the life of the grantor, a situation in which the children or heirs of the grantor have no say in those decisions, as they are set in legal stone. Irrevocable trusts are also required as a qualification for Medicaid nursing home options. This requirement assures that the grantor’s assets are protected while in the nursing home, and that they are not being taken advantage of.
Legal jargon can be confusing, but trust me, trusts don’t have to be! If you have any questions regarding trusts or any other legal matter, please contact Emily Latiolais at Latiolais Law Firm. A professional is ready to serve you!