Spendthrift Trust: Protecting a Beneficiary

The Short Answer

“Spendthrift” is not really a separate type of trust so much as a protective feature you add to one. A spendthrift clause can go into a living trust, an irrevocable trust, or a testamentary trust. Its job is to make sure the money reaches the person you intended, over time, instead of a creditor, a lawsuit, or a bad week.

How It Works

The protection comes from separating ownership from access:

• The trust owns the assets, not the beneficiary.
• The beneficiary has only a right to the distributions the trustee decides to make.
• Because the beneficiary cannot sell or borrow against that right, a creditor generally cannot force a payout or seize the trust property.
• The trustee can pay the beneficiary’s expenses directly, or release funds on a schedule you set, keeping control out of impulsive hands.

The trustee’s judgment matters here, so choosing the right trustee is part of making a spendthrift trust work.

Who It Protects

Families use a spendthrift trust when leaving money outright feels risky: a beneficiary who struggles with debt, addiction, or money management; one who faces lawsuits or works in a high-liability job; or simply a young heir who is not ready for a lump sum. It is also a common way to keep an inheritance from being pulled into a beneficiary’s divorce. The trust lets you provide for someone without handing them a check they might not keep.

What It Cannot Do

Spendthrift protection is strong, but not a fortress. Most states let certain claims reach the trust anyway, most often child support and spousal support, and federal claims such as tax liens can apply. And the protection only lasts while the trustee holds the money; once a distribution is actually made, it belongs to the beneficiary and can be reached like any other asset. The exact rules and exceptions vary by state, which is why a spendthrift trust is drafted by an attorney, not filled in from a form.