A Louisiana Pot Testamentary Trust, also known as a Pot Trust or Common Trust, is a specific type of trust that is commonly used in estate planning. This trust provides flexibility for the settler (the person creating the trust) to distribute assets among multiple beneficiaries while still maintaining control over the trust's management. The use of a Louisiana Pot Testamentary Trust allows for the consolidation of assets and streamlines the administration process. One key characteristic of a Louisiana Pot Testamentary Trust is that it allows the settler to set certain conditions or contingencies that must be met before the assets are distributed to the beneficiaries. The trust document will outline specific rules regarding the distribution of the assets, including how the assets are to be split among the beneficiaries and when distributions can take place. There are several types of Louisiana Pot Testamentary Trusts: 1. Sprinkling Trust: This type of trust allows the trustee to have discretion in distributing the trust assets among the beneficiaries. The trustee can determine the amount and timing of distributions based on the needs and circumstances of the beneficiaries. 2. Age-Based Trust: This trust sets specific age thresholds for the beneficiaries to receive their share of the trust assets. For example, the trust may state that a beneficiary can only receive their share once they reach a certain age, such as 25 or 30. 3. Survivorship Trust: In a survivorship trust, the assets are distributed to the surviving beneficiaries only when the other beneficiaries have passed away. This type of trust ensures that the assets continue to benefit the surviving beneficiaries while providing for future generations. 4. Disability Trust: A disability trust ensures that beneficiaries with special needs or disabilities receive necessary support without jeopardizing their eligibility for government assistance programs. This trust provides for the beneficiary's care and well-being throughout their lifetime. Overall, a Louisiana Pot Testamentary Trust allows for the efficient and effective management of assets while providing flexibility in distributing wealth among multiple beneficiaries. It is important to consult with an experienced estate planning attorney to ensure the trust is properly executed and aligns with your specific wishes and goals.
Louisiana Pot Testamentary Trust
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A testamentary trust (a trust established by will after death) is subject to tax at graduated income tax rates. Conversely, an inter vivos trust (a trust created during a settlor's lifetime) is taxed at the highest marginal tax rate applicable to individuals (currently 43.7% in BC).
How does it save tax? A testamentary trust allows the person who controls it to split the income generated by the trust between family members. Importantly, children who receive income from a testamentary trust are taxed at adult tax rates, instead of penalty rates (up to 66%) which apply to other types of trusts.
The main benefits of testamentary trusts are their ability to protect assets and to reduce tax paid by beneficiaries from income earned from the inheritance.
Since the income earned within a testamentary trust is taxed on a separate tax return at graduated tax rates, an income- splitting opportunity arises for your beneficiaries. For example, let's assume an adult child is in the top marginal tax bracket of approximately 46% (top marginal tax rate varies by province).
Currently, taxable income earned in a testamentary trust is subject to the same graduated tax rates as an individual taxpayer (this is subject to change after December 31, 2015).
The adult pays the top marginal tax rate on their non-inheritance income. the beneficiaries of the testamentary trust include three. the low income rebate applies to the distributions to minors and. the inheritance earns income of $60,000 per annum.
A testamentary trust is set up in a person's will and starts upon their death. It holds and protects all, or some, of the person's assets such as property and investments. The trust looks after the assets for the beneficiaries. Beneficiaries are the people or organisations that will benefit from the trust.
Testamentary trusts are discretionary trusts established in Wills, that allow the trustees of each trust to decide, from time to time, which of the nominated beneficiaries (if any) may receive the benefit of the distributions from that trust for any given period.
The trust can also be used to reduce estate tax liabilities and ensure professional management of the assets. A disadvantage of a testamentary trust is that it does not avoid probatethe legal process of distributing assets through the court.