Louisiana residents who have worked hard and saved diligently often worry about leaving large sums to beneficiaries who are very young, have problems with drugs or alcohol, or have acted irresponsibly with money in the past. Spendthrift trusts allow their creators to control how their assets will be distributed after they pass away, and they can be used to protect beneficiaries from themselves.
The assets placed into a spendthrift trust are managed by an independent trustee. This trustee is given authority by the trust’s creator to distribute funds either when they see fit or when certain predetermined milestones are reached. Spendthrift trusts often contain rules that only allow funds to be distributed when beneficiaries reach a certain age, graduate from college, have a child or maintain sobriety for a given period of time. Spendthrift trust creators include these provisions to protect their beneficiaries and to prevent them from being taken advantage of.
Protection from creditors
Spendthrift trusts can also be used to protect assets from a beneficiary’s creditors or former spouse. These estate planning tools are sometimes created to prevent beneficiaries from receiving large sums during a divorce or when a divorce seems imminent. Creating a spendthrift trust for this reason is common in states with strict community property laws like Louisiana.
Spendthrift trusts give their creators a lot more control over how their assets will be distributed, but they add complexity to estate plans. They must be drafted carefully by experienced professionals, they must obtain tax identification numbers and they must submit tax returns every year.