Also known as: spendthrift characters · spendthrift
Written by attorneys · grounded in primary & secondary sources — see 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.
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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.
Language 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…