A trust provision prohibiting a beneficiary from voluntarily or involuntarily transferring their interest in the trust, thereby protecting the beneficiary's interest from creditors' claims. The clause prevents assignment, pledge, or attachment of the beneficiary's interest before actual distribution, with exceptions often made for certain creditors like child support obligations.
A spendthrift clause stops beneficiaries from selling or borrowing against their future trust inheritance, and protects the trust assets from the beneficiary's creditors. If your irresponsible nephew can't manage money, a spendthrift clause means his creditors can't seize his inheritance before he receives it.
⏱ When you'll encounter this term
- Setting up trusts for beneficiaries with financial problems
- Protecting inheritance from beneficiary's creditors
- Preventing spendthrift beneficiaries from wasting inheritance
- Trust litigation involving creditor claims
"Dad included a spendthrift clause in the trust for my brother, who has a gambling problem. Even though my brother owes money to creditors, they can't touch his trust inheritance because of the spendthrift clause—the trustee controls distributions and creditors can only reach money after it's actually paid to my brother."
⚖️ Compare: With vs Without Spendthrift Clause
Creditors cannot reach trust assets before distribution. Beneficiary cannot sell or borrow against future distributions. Protects from beneficiary's financial mistakes.
Creditors may be able to claim beneficiary's interest. Beneficiary might be able to assign or pledge interest. Less protection.
💡 Did you know?
Spendthrift clauses don't protect against all creditors—child support, alimony, and sometimes tax debts can often reach trust assets despite a spendthrift clause. The protection isn't absolute, but it does shield against most general creditors.