Using Louisiana Trusts To Protect From Future Creditors

I've had a number of inquiries lately about how people can protect their assets just in case they get sued and someone gets a big judgment against them. In case you haven't heard, we live in a litigious society.

Some people call this, "Asset Proection." But Asset Protection is a broad term. Some people call protecting assets from nursing home expenses, "Asset Protection."

For purposes of this post, I'll be referring to Asset Protection as basic things one can do using Louisiana trusts to protect one's assets from being siezed in case you get sued and someone successfully obtains a large monetary judgment against you.

In general, the Louisiana Trust Code provides that your creditor can sieze only:

1. Your interest in trust income or trust principal that you may voluntarily alienate; or
2. Your interest in trust income or trust principal to the extent that you donated property to the trust, directly or indirectly.

Most trusts are - and should be - "Spendthrift Trusts." Language in the trust instrument that a beneficiary's interest shall be held subject to a "spendthrift trust" is sufficient to restrain alienation by a beneficiary to the maximum extent permitted by the Louisiana Trust Code.

Let's say, for example, that you transfer your house to an irrevocable spendthrift trust for your children. From a tax standpoint, you will lose your property tax homestead exemption, and you will likely lose the ability to sell the house without incurring capital gains tax. The house may be exempt from your future creditors and your children's future creditors. Since you are not a trust beneficiary, it is protected from your creditors. Since your children cannot alienate their interest in the trust, and because they did not donate property to the trust, the trust assets are protected from your children's future creditors.

If you have questions or need help with Estate Planning in Louisiana, here's what you do:

• If you have general questions about estate planning in Louisiana, post a comment to this post. I check for comments daily and will be happy to respond to your comment. Other readers may also be able to share similar experiences.
• If you would like to inquire about retaining our law firm to assist you with estate planning, you may email me (paul@rabalaislaw.com - put "Need Estate Planning Help" in subject line), or you can call our office at 225-329-2450.

Until next time...

Paul Rabalais

Comments

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My mother is possibly a candidate for nursing home care in the future. Brother and I are wanting to do what we can to plan the protection of and distribution of her estate. My brother has power of attorney.

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