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A trust provision that prevents a beneficiary from voluntarily transferring their interest and blocks creditors from reaching trust assets before a distribution is made.
A spendthrift clause is one of the most common — and most practically useful — provisions in a trust document. It operates on two fronts simultaneously: it stops the beneficiary from pledging or assigning their future trust distributions as collateral, and it prevents the beneficiary's creditors from intercepting distributions before those funds actually leave the trust. Once money is distributed and in the beneficiary's hands, however, normal creditor rules apply.
The provision matters deeply to wealthy families because even responsible, financially sophisticated beneficiaries can face unexpected creditor claims — divorce proceedings, business disputes, or personal liability judgments. A hypothetical family patriarch who established a trust for his adult children may have included a spendthrift clause not because he doubted them, but as a structural safeguard against circumstances no one could predict.
A common confusion is treating a spendthrift clause as absolute protection. Most states recognize exceptions: claims by a former spouse for alimony or child support, claims by the government, and in some jurisdictions, claims by creditors who provided necessities of life. The clause's effectiveness also depends heavily on the state law governing the trust. Families reviewing existing trust documents should ask their attorney to explain precisely how the spendthrift provision operates under the applicable state's rules.
Lần xem xét gần nhất August 25, 2026 · Chính sách biên tập
