Also known as: spendthrift characters · spendthrift
Written by attorneys — see sources below.
A quality of a trust term that restrains both voluntary and involuntary transfer of a beneficiary's interest.
Serena Soto funds an irrevocable trust for her nephew Santiago Sanchez. The instrument states that Santiago's interest shall not be anticipated or assigned by him or reached by his creditors. A court later determines that this language supplies spendthrift character because it blocks both voluntary pledges and creditor attachment before distribution.
Sarah Sullivan holds a judgment against her former business partner Sean Steele. Sean is the beneficiary of a trust whose terms lack any restraint on transfer. The court authorizes Sarah to attach future distributions because the absence of spendthrift character leaves Sean's interest exposed under the governing statute.
Stephen Shaw creates a trust for his daughter Selena Singh. The document directs that her interest is held subject to a spendthrift trust. The court recognizes spendthrift character even though the precise statutory phrase is absent, because the words of similar import satisfy the validity requirement.
Sapphire Holdings settles a trust for its founder. The instrument provides that the beneficiary's interest is held subject to a spendthrift trust. This phrasing alone establishes spendthrift character and prevents the beneficiary from pledging the interest or allowing creditors to reach undistributed amounts.
Stonehaven Properties creates a discretionary trust for a key employee. The trustee refuses a distribution request from the employee's judgment creditor. Spendthrift character is irrelevant. The creditor cannot compel payment because the distribution remains subject to the trustee's discretion.
A surviving spouse claims a community-property share of her deceased husband's pension benefits held in trust. The trust terms contain language restraining alienation. The Court examines whether spendthrift character in the trust survives ERISA preemption analysis under federal law.
Isaac Boggs began working for South Central Bell in 1949 and remained employed until his retirement in 1985. He was married to Dorothy Boggs from 1949 until her death in 1979, and the couple had three sons. After Dorothy died, Isaac married Sandra Boggs in 1980, and they remained married until Isaac's death in 1989. Upon retirement, Isaac received a lump-sum distribution of $151,628.94 from the Bell System Savings Plan, which he rolled over into an Individual Retirement Account worth $180,778.05 at his death. He also received 96 shares of AT&T stock from the Bell South Employee Stock Ownership Plan and a monthly annuity of $1,777.67 from the Bell South Service Retirement Program. Dorothy's will bequeathed one-third of her estate to Isaac outright along with a lifetime usufruct in the remaining two-thirds, with naked ownership passing to the sons. A 1980 Louisiana judgment of possession ascribed to Dorothy's estate a community property interest in Isaac's Savings Plan account valued at $21,194.29. After Isaac's death, Sandra began receiving a survivor annuity and other benefits. The sons filed suit in Louisiana state court claiming a portion of the retirement benefits under Dorothy's will and Louisiana community property law. Sandra then filed a declaratory judgment action in the United States District Court for the Eastern District of Louisiana asserting that ERISA preempts the sons' claims. The District Court granted summary judgment against Sandra. The Fifth Circuit affirmed. The Supreme Court granted certiorari.
View caseLanguage that prohibits anticipation, assignment, or creditor attachment of the beneficiary's interest supplies spendthrift character. Words of similar import are sufficient even without the precise statutory phrase. The clause must address both voluntary and involuntary transfers to qualify.
Spendthrift character blocks creditors from reaching the beneficiary's interest or future distributions before the trustee delivers them. Once cash reaches the beneficiary, ordinary collection remedies apply. Certain support claims and state or federal tax obligations may still override the restraint.
A beneficiary may not validly pledge or assign an interest protected by spendthrift character. Any attempted transfer in violation of the provision is ineffective. The trustee remains obligated to disregard the pledge and pay the beneficiary directly.
…see Marriage of Campa, supra , at 124, 152 Cal. Rptr., at 367-368, and the basic principle that a beneficiary's interest in a spendthrift trust, despite otherwise applicable protections, can be reached in the context of divorce and separation. See E. Griswold, Spendthrift Trusts 389-391 (2d ed. 1947) (summarizing state case…