Trusts

A Special Needs Trust (SNT) is a legal tool for individuals with disabilities. It allows them to receive financial help without losing government benefits such as Medicaid and Supplemental Security Income (SSI). These programs have strict limits on income and assets. If someone receives an inheritance or gift, it might disqualify them from help. An SNT prevents this by holding assets in a trust managed by a trustee. The trustee distributes funds to supplement, not replace, government aid.

Funds in a Special Needs Trust can cover costs that enhance the beneficiary’s life. This includes education, medical care not covered by insurance, transportation, entertainment, and personal care. There are different types of SNTs. First-person (Self-Settled) SNTs use the beneficiary's own money. This can come from an inheritance or a legal settlement. Someone else, such as a parent or family member, funds third-party SNTs. These trusts help people with disabilities keep their financial security. They do this while still receiving important government support.

A Special Needs Trust (SNT) helps those who want to support a loved one with a disability. It lets them get financial help while keeping their government benefits, like Medicaid and Supplemental Security Income (SSI). This type of trust is particularly beneficial in the following situations:

1. Parents or Guardians of a Disabled Child - An SNT helps children with disabilities receive lifelong support. It provides financial aid while protecting their government benefits. 

2. Individuals with Disabilities Who Expect a Financial Windfall - If someone with a disability expects a big inheritance, settlement, or court award, a Special Needs Trust (SNT) can help. It protects their eligibility for important assistance programs. 

3. Family Members Providing Long-Term Support - Relatives can use a Special Needs Trust (SNT) to pass on assets to a loved one with special needs. This way, they manage the money well, and it won't affect their aid eligibility. 

4. Caregivers Concerned About Financial Exploitation - If a beneficiary struggles with finances or is at risk of financial abuse, a Special Needs Trust (SNT) helps. It protects them by putting control in the trustee's hands

5. Disabled Individuals Who Want to Preserve Their Benefits - If a person on government aid gets money unexpectedly, they can set up a First-Person (Self-Settled) SNT. This helps protect their funds and keep their benefits.

A Special Needs Trust (SNT) helps a beneficiary keep their government benefits. It does this by making sure any financial support they get does not count as personal assets or income. They could lose access to programs like Medicaid and Supplemental Security Income (SSI). These programs have strict limits. For example, personal savings for an individual usually can't exceed $2,000. A person with a disability may lose their benefits if they inherit money or receive a gift. This can happen until those funds are spent.

With an SNT, the trust owns and manages the assets, not the beneficiary. A trustee manages payments. They ensure funds are only used for approved expenses. These may include medical treatments not covered by insurance, education, therapy, transportation, and fun activities. You can’t use the funds for basic needs. This includes food, housing, or cash payments. The government may view these as income.

Some SNTs, like a First Person (Self-Settled) SNT, must have a Medicaid payback provision. If the beneficiary dies, any leftover funds in the trust might repay Medicaid for benefits received. Someone other than the beneficiary funds third-party SNTs. So, they don’t need Medicaid repayment.

An SNT helps beneficiaries get extra resources, improving their quality of life. They can still qualify for important government programs. These programs offer medical care, housing help, and help with daily living costs.

Yes, a person with a disability can set up their own Special Needs Trust (SNT). It must be a First Person Special Needs Trust, also called a Self-Settled SNT or a d(4)(a) Trust. This name comes from the federal law that allows it. This trust protects the assets of a person with a disability. It also helps them keep their eligibility for government benefits, such as Medicaid and Supplemental Security Income (SSI).

Requirements for a Self-Settled SNT

• The trustee must establish the trust before the beneficiary turns 65. 

• It must be irrevocable, meaning the beneficiary cannot take the assets out at will. 

• The Social Security Administration defines the beneficiary as disabled. 

• To set up the trust, a disabled person or their parents, grandparents, legal guardians, or a court must help. 

• It must have a Medicaid payback rule. When the beneficiary dies, any leftover funds must repay Medicaid for the benefits received.

A Self-Settled SNT assists people with disabilities. It supports those who inherit money, get a personal injury settlement, or receive a large sum. This money could disqualify them from government benefits. Instead of spending their assets to stay eligible, they can put the funds in a trust. A trustee will manage the money for expenses that improve their quality of life.

Alternatives 

Suppose the funds come from a third party (such as a parent or relative). A Third-Party Special Needs Trust is often a better choice. It doesn't need Medicaid payback, so it gives more flexibility in estate planning.

There are three main types of Special Needs Trusts (SNTs). Each type serves a different purpose. The purpose relies on the individuals or organizations that fund the trust and on how they manage the assets.

A Special Needs Trust (SNT) holds different assets. It helps provide financial support to beneficiaries. It also keeps their eligibility for government benefits. You must choose the assets in an SNT with great consideration. They should improve the beneficiary’s quality of life. You should not count them as income or resources for programs like Medicaid and SSI.

Common Assets That Can Be Placed in An SNT

1. Cash and Bank Accounts 

   • Savings and checking accounts 

   • Certificates of deposit (CDs) 

   • Money market accounts 

2. Investments and Securities 

   • Stocks and bonds 

   • Mutual Funds 

   • Annuities 

3. Real Estate (With Restrictions) 

   • A home or rental property (if not considered the primary residence). 

   • Land and Investment properties (must be managed appropriately to avoid affecting benefits) 

4. Personal Property and Valuables 

   • Vehicles (cars, adapted vans for mobility needs) 

   • Furniture and household items 

   • Jewelry, art, and collectibles 

5. Insurance Policies 

   • Life insurance proceeds (must be structured properly to avoid disqualification from benefits) 

   • Disability insurance payouts 

6. Legal Settlements or Inheritances 

   • Personal injury settlements

   • Court-ordered damages or compensation

   • Inheritances received directly by a disabled individual (should be placed in a First-Person SNT to avoid disqualification from benefits)

7. Business Interests

   • Ownership in a family business (if properly structured within the trust)

   • Income-producing assets like royalties or intellectual property

Assets That Should NOT Be Placed in an SNT

Some assets are generally not recommended for an SNT because they may create tax issues, unnecessary complications, or benefit disqualification risks:

• Food and Shelter Payments – If the trust pays for rent, mortgage, or groceries, it could reduce SSI benefits.

• Direct Cash Payments to the Beneficiary – Any cash given directly could be counted as income, affecting eligibility.

• Retirement Accounts (401(k)s, IRAs) in the Name of the Beneficiary – These accounts are typically required to have required minimum distributions, which could be counted as income.

Yes, it's a good idea to work with an attorney when setting up a Special Needs Trust (SNT), especially in Louisiana. Trust laws here can be complex. You can create an SNT on your own, but mistakes can lead to big problems. These mistakes could cause the beneficiary to lose eligibility for Medicaid, SSI, or other government benefits. A lawyer will help you understand Louisiana’s trust laws. They can also help you avoid costly errors and create a plan that meets your family’s long-term needs. For more information, see Finding and Hiring a Lawyer.

A Spendthrift Trust protects assets from creditors. It also stops a beneficiary from mismanaging their inheritance. This helps people facing money issues, large debts, or risks of losing assets due to lawsuits or poor spending.

• The trustee is in charge of managing the trust. They determine how to distribute the funds. 

• The beneficiary who receives the trust funds cannot access the principal. They also cannot use it as collateral for debts. 

• Creditors can't take trust assets. They can only try to claim funds after the beneficiary receives those funds. 

• You can set up the trust to make scheduled payments instead of a lump sum. This helps ensure long-term financial security.

A Spendthrift Trust is a smart choice for those who want to protect assets. It helps beneficiaries manage their money with careful consideration. Someone can mismanage a lump-sum inheritance or lose it to creditors. It may also be at risk due to bad financial habits. So, it's important to manage it with careful consideration. Those who should consider setting up a Spendthrift Trust include:

1. Parents or Grandparents Concerned About An Heir’s Spending Habits

A Spendthrift Trust helps if a family member is bad with money. It gives them controlled payments over time instead of a large sum all at once.

2. Beneficiaries with Significant Debt or Creditors 

A Spendthrift Trust can shield an inheritance from creditors. This is useful if the heir has credit card debt, medical bills, or legal judgments. The trustee decides how to distribute the assets. Creditors can only claim money after the beneficiary has received it.

3. Individuals Prone to Addiction or Poor Life Choices 

Spendthrift Trust supports beneficiaries dealing with gambling, substance abuse, or bad money habits. It stops them from depleting their inheritance. The trustee manages distributions and ensures that the beneficiaries use the money wisely.

4. Beneficiaries with Mental Health Issues or Disabilities

A Spendthrift Trust helps those who can't manage their finances. It protects individuals who are mentally incapacitated or vulnerable to financial exploitation. This trust keeps control with a responsible trustee, ensuring long-term financial security.

5. Professionals in High-Risk Careers (Doctors, Business Owners, Lawyers, etc.) 

A Spendthrift Trust can protect against lawsuits for people in litigious jobs. The assets stay in the trust. This means the beneficiary does not own them directly. This setup usually shields the assets from legal claims.

6. Divorcing Beneficiaries 

A Spendthrift Trust can help if someone faces divorce or is at risk. It protects inherited assets from the court splitting them in a divorce settlement. This way, the money remains within the family.

7. Parents Creating an Estate Plan for Minor Children

A Spendthrift Trust helps young children manage their inheritance wisely. It releases funds at key life moments, like for education, housing, or starting a business. This way, they don’t get everything at once when they become adults.

No, a beneficiary cannot access funds from a Spendthrift Trust at will. The trustee has complete control over the trust assets. They must make distributions based on the trust agreement's terms. The beneficiary cannot ask for money, sell their trust interest, or use trust assets for loans.

• No Direct Control by the Beneficiary – The beneficiary does not own the trust assets. They cannot withdraw funds whenever they want.

• Trustee Manages Distributions – The trustee determines when, how, and under what conditions to distribute the funds. This prevents reckless spending or financial mismanagement.

• Creditor Protection – The beneficiary can't access the trust directly. So, creditors can't take the trust assets. They can only attempt to claim funds after the beneficiary receives them.

• At the Trustee’s Discretion – The trustee decides how to distribute funds based on what the beneficiary needs. This includes costs for education, medical expenses, housing, or daily living.

• On a Fixed Schedule – The trust may specify regular payments (e.g., monthly or annually).

• Upon Meeting Certain Conditions – The trust may need milestones like graduating from college, keeping a job, or finishing rehab before giving out funds.

• For Essential Expenses Only – Some Spendthrift Trusts restrict payouts to certain needs, such as medical care, housing, or education.

• Exceptions: When Might a Beneficiary Gain Access?

  • If the trust agreement allows lump-sum payments at certain ages (e.g., 25% at age 25, 50% at age 30).

  • If the trust terminates under specific conditions (e.g., after a set number of years).

  • If the beneficiary becomes the trustee (though this is rare in spendthrift provisions).

A Spendthrift Trust shields assets from creditors by limiting the beneficiary's control. A spendthrift clause in the trust prevents the beneficiary from selling, assigning, or transferring their interest. The beneficiary can't access or transfer the funds. So, creditors can't lien or reach the trust assets directly. They can only claim money after the payer pays it to the beneficiary. If a trustee delays or holds back distributions, creditors cannot force payment. If the beneficiary gets sued, the trust assets remain safe. This is because the assets belong to the trust, not the beneficiary.

Limitations: When Creditors Might Reach Trust Funds

While Spendthrift Trusts offer strong protection, some exceptions exist:

• After they distribute the money, creditors can take those funds from the beneficiaries' personal accounts.

• Child support and alimony claims may override the spendthrift protection in some cases.

• Government debts, like taxes owed to the IRS or Medicaid recovery, can sometimes take priority over spendthrift protections.

Someone can change or revoke a Spendthrift Trust. It all depends on how it was set up. It is important to know whether it is revocable or irrevocable.

1. Revocable Spendthrift Trust

   • It can be changed or revoked by the person who created it (the settlor) as long as they are still alive and mentally competent.

   • The settlor can change the terms, swap out the trustee, add or remove beneficiaries, or end the trust completely.

   • Once the settlor dies, the trust usually turns irrevocable, and the beneficiaries cannot change it.

2. Irrevocable Spendthrift Trust

   • Once established, no one can change or revoke it unless special legal conditions apply.

   • The settlor gives up control over the assets, and the trust operates under fixed terms.

   • The only ways to modify an irrevocable Spendthrift Trust are:

     • Court approval – If circumstances change significantly, a judge may allow modifications.

     • Consent of all beneficiaries and trustee – Sometimes, Louisiana law lets modifications happen if everyone agrees.

     • Trust terms allowing modifications – If the trust document has rules for modifications, you can make those changes.

Key Considerations

• A revocable trust offers more flexibility, but it lacks the creditor protection of an irrevocable trust.

• For asset protection, an irrevocable Spendthrift Trust is often best. It does limit changes, but it offers strong security.

Yes, working with an attorney when creating a Spendthrift Trust is highly recommended. Creating a basic trust is possible, but poor drafting can cause legal issues. This might mean losing asset protection or causing problems for beneficiaries. Talk to an estate planning attorney. They can help protect your assets and secure your beneficiaries' finances. They can help you set up a Spendthrift Trust in the proper way. For more information, see Finding and Hiring a Lawyer.

A Land Trust lets a landowner transfer real estate to a trustee. The owner still controls how they use the land. This trust helps with asset protection, privacy, conservation, and estate planning. In Louisiana, Land Trusts are usually set up as irrevocable trusts. This means that once they create them, they cannot change or cancel.

A Land Trust is a legal deal where a landowner gives property to a trustee. The landowner still controls how they use the land. The trustee holds the title to the property but must manage it according to the trust agreement. The beneficiary, which is the landowner or their heirs, can use, sell, or profit from the land. This depends on the trust's terms.

There are three types of Land Trusts in Louisiana: 

1. Conservation Land Trust 

   • Used to preserve land from future development (e.g., forests, wetlands, farmland).

   • Often involves donating land to a nonprofit conservation organization or government agency.

   • It can provide tax benefits if structured correctly.

2. Title-Holding Land Trust 

   • Used for real estate investment and privacy.

   • Allows the landowner to retain control while keeping their name off public records.

   • Often used by investors to hold multiple properties anonymously.

3. Community Land Trust (CLT)

   • A nonprofit trust that owns land for affordable housing or community use.

   • Homeowners own their homes but lease the land from the trust. This helps keep housing costs low.

A Land Trust helps people and groups protect, manage, or pass on real estate. It offers privacy, asset protection, and control over land use. Here’s who should consider setting up a Land Trust:

1. Landowners Wanting Privacy

   • If you do not want your name associated with a property in public records, a Land Trust maintains ownership outside of those records.

   • Real estate investors often use Land Trusts to keep transactions confidential.

2. Families Planning for Estate Transfers

   • A Land Trust helps pass land to heirs without probate. This means ownership transfers smoothly.

   • Families can use a trust to keep land safe for future generations. This helps stop unwanted sales or disputes.

3. Farmers and Ranchers

   • A Land Trust can protect agricultural land from developers who want to buy it for development.

   • Owners can lease the land for farming while keeping it in the family.

4. Conservationists and Environmentalists

   • A Land Trust protects natural habitats, forests, and wetlands by keeping the land undeveloped.

   • Some trusts qualify for tax benefits when donating land for conservation.

5. Real Estate Investors and Developers

   • Investors use Land Trusts to manage multiple properties under one legal entity.

   • A trust can make it easier to buy, sell, or lease real estate without revealing ownership.

6. Property Owners Concerned About Lawsuits or Creditors

   • A Land Trust can protect your valuable land from lawsuits and debts.

   • While not completely lawsuit-proof, it can make it harder for creditors to seize the land.

7. Homeowners in High-Liability Professions

   • Doctors, lawyers, and business owners can protect their homes or investment properties by placing them in a Land Trust. This helps keep your assets safe from lawsuits.

A Land Trust helps conserve natural landscapes, wildlife habitats, farmland, and historic sites. It protects land from development or misuse. Landowners can place restrictions on their property use. This often happens with nonprofit conservation groups or government agencies.

Ways a Land Trust Supports Conservation

1. Permanent Protection from Development

   • A Conservation Land Trust keeps land safe. No one can sell, split, or develop it beyond the trust's rules.

   • The trust document outlines ways to use the land. For example, farmers, wildlife preservationists, and outdoor recreation enthusiasts can use it.

2. Conservation Easements (Restricted Land Use Agreements)

   • A landowner can put a conservation easement on their property. This easement creates legal restrictions on future development.

   • Public records document these restrictions, which remain in effect even if someone sells the land.

   • Easements can restrict activities like commercial development, logging, and mining. These limits help protect the environment from harm.

3. Protecting Wildlife and Natural Resources

   • A Land Trust helps keep forests, wetlands, rivers, and coastal areas safe from development.
   • Some trusts work with state and federal conservation programs to enhance wildlife protection.

4. Keeping Farmland or Ranchland in Use

   • A Land Trust helps keep land agricultural. It stops future owners from turning it into commercial or residential developments.

   • Some trusts allow leasing to farmers while keeping the land protected.

5. Tax Benefits for Landowners

   • Landowners can get federal and state tax deductions if they donate property to a qualified conservation trust.

   • If the land is placed in a conservation trust, it may qualify for reduced property taxes.

Yes, you can still use your land after placing it in a land trust. In Louisiana, the trustee has the legal title. However, as the beneficiary, you can use, manage, or live on the property as stated in the trust agreement. This setup offers privacy, asset protection, and possible estate planning benefits. You can keep daily control of the land.

Transferring property to a land trust in Louisiana has tax implications. These depend on the trust's structure.

1. Property Taxes & Homestead Exemption

   • If the property is your main home, you may lose the homestead exemption. This exemption helps lower your property taxes.

   • Some irrevocable land trusts may not qualify for this exemption.

   • Exceptions may apply, so it’s best to check with a tax advisor or local assessor.

2. Capital Gains Tax

   • If the land trust changes, beneficiaries might receive a step-up in basis when they inherit the property. This could lower capital gains tax when they sell it.

   • In an irrevocable trust, the step-up may not apply. This can lead to higher capital gains taxes.

3. Income Taxes

   1. Revocable land trust: You report income from the property on your personal tax return.

   2. Irrevocable land trust: The trust may need its own tax ID and file a separate return. The tax authorities might tax income at higher trust rates. This can happen unless the trust distributes the income to beneficiaries.

4. Gift & Estate Taxes

   • The IRS may treat the transfer of property into an irrevocable land trust as a gift, subject to federal gift tax rules.

   • Property in an irrevocable trust usually leaves your estate. This can lower your estate tax liability.

Tax consequences can change, so it’s smart to talk to an estate or tax attorney before putting property into a land trust. For more information, see Finding and Hiring a Lawyer.

A conservation servitude, or conservation easement, is a legal agreement. It imposes lasting restrictions on how people can use the land. This protects the land's natural, ecological, or historic value. The landowner still owns the land but must limit development and some activities on it.

A conservation servitude protects the land’s environmental or historic value. A land trust is a wider estate planning tool. It can serve many purposes, like conservation. Some people use both together to protect land while also managing it through a trust.

Yes, you can sell your property after placing it in a land trust, but there are a few important details to keep in mind:

• The trustee holds the legal title to the property, so the trustee must be the one to execute the sale. However, as the beneficiary, you typically direct the trustee’s actions.

• As both trustee and beneficiary, which is typical in revocable land trusts, you can sell the property with greater ease.

• The sale proceeds usually go into the trust. They are then distributed based on the trust’s terms.

• If the trust is irrevocable, the process can be more complex. It may need consent from all beneficiaries or court approval.

• Review the trust agreement. Talk to an attorney to make sure the sale follows the trust's terms and Louisiana law.

You don’t technically need an attorney to create a land trust in Louisiana, but in most cases, it’s highly recommended, especially to make sure it’s valid, effective, and tailored to your goals. For more information, see Finding and Hiring a Lawyer.

When You Should Strongly Consider Hiring an Attorney for a Land Trust:

1. You’re Transferring Real Estate

   • Louisiana has specific laws around property transfers, especially regarding title, homestead exemption, and community property. A lawyer can help you avoid costly mistakes.

2. You Want Asset Protection or Privacy

   • A poorly drafted trust might not shield your assets or provide the privacy you expect. An attorney ensures proper structure and legal protection.

3. The Trust Involves Multiple Beneficiaries

   • If there are multiple people involved (e.g., family members, co-owners), an attorney can help avoid conflicts and clarify each person’s rights.

4. You Need Tax Planning

   • Transferring land can affect property, income, estate, and capital gains taxes. A lawyer can coordinate with your tax advisor to minimize your tax burden.

5. You’re Including Special Provisions

   • Conservation goals, rental rights, development restrictions, or anything custom—an attorney helps draft language that holds up legally.

6. You’re Using a Land Trust in an Estate Plan

   • To ensure it works in harmony with your will, powers of attorney, or other trusts.