Also known as: spendthrift trust · spendthrift trusts · spendthrift provisions · spendthrift clause
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. Words of similar import suffice to create the restraint even without using the precise phrase spendthrift trust.
Frank created an irrevocable trust for Bob and included a clause stating that Bob's interest shall not be anticipated or assigned by him or reached by his creditors. Mountain Byte later obtained a judgment against Bob and sought to attach future distributions. Because the clause restrains both voluntary and involuntary transfers, the court holds the provision valid and denies the attachment request.
A state probate court interprets a trust clause as creating a valid spendthrift restraint on a beneficiary's interest. Federal tax authorities later challenge the characterization for estate tax purposes. The federal court accepts the state ruling as controlling on the nature of the property interest.
Select any source to read its text and confirm it supports the definition.
A surviving spouse claims a community property interest in pension benefits held in a trust containing spendthrift language. The plan administrator refuses distribution under the state restraint. Federal law preempts the state spendthrift provision and controls the outcome.
A taxpayer holds a beneficial interest in a trust protected by spendthrift language. The IRS asserts a federal tax lien against the interest. The court determines that the lien attaches because federal tax law treats the interest as property reachable despite the restraint.
A beneficiary disclaims an interest in a spendthrift trust to avoid a tax debt. The IRS asserts that the lien attached at the moment of the decedent's death. The court holds that the disclaimer cannot defeat the preexisting federal tax lien.
A clause stating that the beneficiary's interest shall not be anticipated or assigned or reached by creditors restrains both voluntary and involuntary transfers. Words of similar import are enough even without the exact phrase spendthrift trust.
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No. A valid spendthrift provision prevents the beneficiary from transferring the interest in violation of the restraint. Any attempted pledge or assignment of future distributions is ineffective.
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No. State law creates an exception allowing a former spouse with a support judgment to reach distributions. The court may order the trustee to pay amounts equitable under the circumstances up to what the trustee would have distributed under the standard.
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Once distributions are received by the beneficiary they become subject to ordinary creditor remedies. The spendthrift restraint ends at the moment of receipt.
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…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 law); Restatement (Second) of Trusts § 157 (1959). The state court in Marriage of Campa took its implicit determination that the…