Also known as: spendthrift restrictions · spendthrift clause · spendthrift provision
Written by attorneys · grounded in primary & secondary sources — see below
A term of a trust that restrains both voluntary and involuntary transfer of a beneficiary's interest.
Sebastian Santos creates a trust for his daughter Sierra Santos and includes language stating that her interest cannot be assigned or reached by creditors. When Sierra attempts to pledge her future distributions as collateral for a personal loan, the trustee refuses the assignment because the clause prevents voluntary transfer of the interest.
Solomon Silver is the beneficiary of a trust funded by his uncle. A judgment creditor seeks to attach future distributions to satisfy an unpaid debt. Because the trust contains a spendthrift restriction, the court denies the attachment and limits the creditor to other collection methods outside the trust.
Select any source to read its text and confirm it supports the definition.
Sarah Sullivan receives income from a trust whose instrument states only that her interest cannot be assigned by her. A creditor obtains a court order attaching distributions because the clause restrains only voluntary transfer and therefore fails the requirement to restrain both voluntary and involuntary transfers.
Scott Summers is the beneficiary of a discretionary trust that includes a spendthrift restriction. His judgment creditor attempts to compel the trustee to make distributions to satisfy the debt. The court refuses the request because the creditor cannot force discretionary distributions even when a spendthrift restriction is present.
Samantha Stone is the beneficiary of a trust containing a spendthrift restriction. A federal tax lien is asserted against her interest. The restriction yields to the federal claim under governing federal law that permits collection despite the trust term.
A spendthrift provision is valid only if it restrains both voluntary and involuntary transfer of a beneficiary's interest. Language stating that the interest is held subject to a spendthrift trust is sufficient to achieve this restraint.
Supporting sources
A creditor generally cannot reach a beneficiary's interest or distributions before receipt when a valid spendthrift provision exists. Once a distribution is made to the beneficiary, however, the funds become subject to ordinary creditor remedies.
Supporting sources
A creditor may not compel a distribution subject to the trustee's discretion even if the trust contains a spendthrift provision. This protection applies whether or not the discretion is guided by a standard of distribution.
Supporting sources
A spendthrift provision does not shield assets in a revocable trust from the settlor's own creditors during the settlor's lifetime. The retained power to revoke means creditors may reach the trust property regardless of the restriction.
Supporting sources
…Grantor’s said son shall take and receive, per stirpes and not per capita , one equal share thereof absolutely.” There is a spendthrift provision for both principal and income, applicable after the death of the grantor, and it is also provided that the Trustee shall have authority to receive any other funds granted, devised, or…