Spendthrift Trust

In one sentence

A trust that restricts a beneficiary's ability to spend or transfer their inheritance to creditors.

Plain English

A spendthrift trust protects beneficiaries from their own poor financial decisions and shields assets from creditors. The trustee controls distributions rather than giving beneficiaries direct access to funds, so a beneficiary cannot spend the entire inheritance at once or pledge it as collateral for loans. If a beneficiary faces lawsuits or debt, creditors generally cannot reach the trust assets. This is especially useful for beneficiaries who lack financial discipline or have substance abuse issues.

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Example

Robert's trust is structured as a spendthrift trust for his adult son, who has a history of poor financial decisions. The trustee distributes $2,000 monthly for living expenses rather than giving the son access to the entire $500,000 principal. When the son faces a lawsuit, creditors cannot claim the trust assets because the son never had direct ownership.

Used in a sentence

“A spendthrift trust prevents a beneficiary from squandering an inheritance or losing it to creditors.”

Related terms

Trustee

The person or institution legally responsible for managing assets held in a trust.

Beneficiary

A person or organization entitled to receive money or property from a trust, will, or insurance policy.

Trust Instrument

The legal document that creates a trust and outlines how assets will be managed and distributed.

Irrevocable Trust

A trust that cannot be changed, modified, or terminated once created without beneficiary consent.

Revocable Trust

A trust that the grantor can modify, amend, or terminate during their lifetime.

Probate

The court process of validating a will and distributing a deceased person's estate.

Intestate Succession

The legal process of distributing a deceased person's property when they leave no valid will.

Elective Share

A surviving spouse's right to claim a portion of the deceased spouse's estate despite the will.

This page is a plain-English reference and is not legal advice. Laws vary by jurisdiction and change over time. For specific situations consult a licensed attorney.