What is a "spendthrift trust"?

A spendthrift trust is specifically designed to protect the assets within the trust from the creditors of the beneficiaries. This type of trust restricts the beneficiaries' ability to access the trust's assets freely, ensuring that they cannot immediately liquidate their interest or use it as collateral. By limiting access to the assets, the trust serves to prevent beneficiaries from squandering their inheritance, thereby preserving the intended use of the funds for their welfare.

This characteristic of restricting access is a hallmark of spendthrift trusts. They aim to safeguard assets for the long-term benefit of the beneficiaries, allowing the trustee to manage distributions in a way that supports the beneficiaries’ needs without putting the trust property at risk from creditors or irresponsible spending by the beneficiaries themselves.

In contrast, trusts that allow beneficiaries to pledge their interests or those mandated to provide regular distributions do not encapsulate the main goal of a spendthrift trust, which is the protection and preservation of assets from beneficiary control. Similarly, while there are trusts designed for minors, a spendthrift trust can apply to a broader range of beneficiaries beyond just that demographic.