A spendthrift clause can help protect the assets in a trust. If you’re setting up a trust for someone who might not manage money well or has financial issues, this clause can make a big difference. It adds a layer of protection against debt collectors and poor spending habits.
How a spendthrift clause works
A spendthrift clause blocks the beneficiary from selling or giving away their interest in the trust. It also keeps creditors from claiming the trust funds before they are distributed. This means the trustee controls how and when the money gets paid out. You can include this clause in most types of trusts.
Why it protects trust assets
Without this clause, someone owed money by the beneficiary might take legal steps to claim the trust assets. With the clause in place, creditors have to wait until the money reaches the beneficiary. This helps keep the trust’s purpose intact, whether that’s providing steady support or covering specific needs.
When you should consider using one
If you’re creating a trust for someone who struggles with budgeting, faces lawsuits, or has a history of debt, this clause can be especially helpful. It doesn’t give the beneficiary full access to the funds, which can reduce the risk of misuse or seizure. It also gives you peace of mind knowing the trust assets serve their intended purpose.
A spendthrift clause lets you protect your trust from outside claims and poor financial decisions. You can ensure the beneficiary receives support over time, not all at once. This keeps the trust working the way you planned.