What is a Spendthrift Clause?

Most estate plan trusts include provisions of some kind or another. The spendthrift clause can limit a beneficiary from using the assets in the trust. This can be especially useful when you are aware that an intended beneficiary has money issues or poor spending habits. The spendthrift trust could prevent these beneficiaries from spending or borrowing against trust fund assets.

The spendthrift clause usually requires that only a certain amount of the trustee’s money can be given to the beneficiary. But it also usually makes it so that the beneficiary’s creditors cannot place liens or other judgments against the assets of the trust.

Why Would You Want to Consider Implementing a Spendthrift Clause?

Typically, one would consider putting a spendthrift provision into a trust if they thought a beneficiary would misuse or mishandle the assets or otherwise borrow against those assets in order to repay creditors. It is important to note that one cannot set up a spendthrift trust to protect their assets from creditors looking to settle debts. The spendthrift trust only provides protection for the people named as beneficiaries.

Proper estate planning means protecting assets for future generations and intended heirs. However, sometimes we know that those heirs aren’t the best at handling money, or perhaps they have creditors breathing down their necks. A spendthrift clause can help protect assets meant for the beneficiary from the beneficiary if this is deemed necessary.