In Louisiana, there are no inheritance or estate taxes, but there are still federal estate taxes applied to estates with assets over $5 million. There are various methods used to reduce the size of an estate and thus remove some unnecessary tax burdens. One of the most helpful methods is through creating a trust.
Identifying which trusts work for your situation
Creating trusts to reduce estate taxes can be a complicated endeavor. Though these formations aren’t useful for every person’s situation, here are some of the ways trusts can provide tax benefits for an estate:
- AB trust: This form of a trust is sometimes called a ‘marital trust’ or a ‘QTIP trust.’ These can be included in a person’s Last Will and Testaments section of an estate plan or within Revocable Living Trusts. This arrangement can transfer assets to a spouse to take advantage of each person’s tax exemption limit.
- Irrevocable life insurance trust: This designation helps to avoid having a life insurance payment taxed. You then transfer the trust to another person who controls it. In this way, potential death benefits may be excluded from the estate.
- Qualified personal residence trust: This type of trust places the ownership of an eligible home into a trust for a specific term, in which you can continue living in residence. This trust framework can help reduce the size of your estate as well as transfer the property to named beneficiaries.
Planning for your family’s future
You want to make sure that your family is taken care of after you die. Don’t put off planning until your family is stuck with steep and unnecessary tax payments. Contact an experienced estate planning lawyer to begin preparations now.