What Is a Spendthrift Clause in a Trust?

A spendthrift, of course, is a person who spends without regard to thrift. (When the word was coined, one meaning of "thrift" was "wealth," so a spendthrift was originally one who spent his wealth.) Ordinarily, the interest held by a beneficiary in a trust is something a spendthrift can spend—an asset of the beneficiary, having some monetary value. The beneficiary can alienate (i.e., transfer ownership to another person or entity) that interest, for example by assignment. And a creditor of the beneficiary can ordinarily attach the beneficiary's interest in the trust to the extent of the debt, and receive some portion of distributions from the trust to which the beneficiary is entitled, until the debt is satisfied.


A spendthrift clause is simply a provision in a trust intended to thwart these operations. It prevents the beneficiary from alienating his or her interest in the trust, whether voluntarily or involuntarily (thereby prohibiting creditors from attaching the interest).


State Law Enforceability of Spendthrift Clauses


But in order for spendthrift clauses to be effective, they must be enforceable under applicable state law. Virtually every state recognizes spendthrift clauses as valid in some form. About half the states have a statute legitimizing spendthrift trusts; the others have recognized them by judicial decision.


The effect of spendthrift clauses may be eroding to different degrees in the various states, but the spendthrift trust remains a powerful planning tool. In view of the complications, as spendthrift law continues to develop, individuals are strongly urged to work with an attorney experienced in their state's law in this matter.


Recent Posts

See All

Common Legal Terms Relating To Wills And Intestacy

ABATEMENT Cutting back certain gifts under a will when it's necessary to meet expenses, pay taxes, satisfy debts or take care of other bequests that are given priority under law or under the will. ADE

Proceeds of Life Insurance - I.R.C. §2042

Internal Revenue Code section §2042 deals with the inclusion in the gross estate, of the proceeds of life insurance policies, payable by reason of the death of the insured. In general, the insurance

ADLER & ADLER,PLLC

Wills, Trusts & Estates 

30 years of

1180 6th Avenue

8th Floor

New York, New York 10036

Call For Consultation:

212-843-4059 or 646-946-8327

EXPERIENCE

WE SERVE CLIENTS THROUGHOUT

NEW YORK STATE

Adler & Adler celebrating 30 years of succesful law practice
Top attorney Robert Adler gets highest rating from Avvo.

Serving New York State: New York City including Manhattan (New York County); Brooklyn (Kings County); Bronx; Queens; Staten Island (Richmond County); Long Island (Nassau County and Suffolk County); Westchester County, Rockland County, Erie County, Schenectady County,

Monroe County, Onandaga County, Orange County, Albany County, Dutchess County, Broome County, Sullivan County, and Ulster County.

​​​​ © 2019 Adler & Adler, PLLC - Attorney Advertising.  The content on this site does not constitute legal advice. There is no attorney-client relationship created through the presentation of this website or your sending us any information about your activities or needs. The commencement of an attorney-client relationship requires  our mutual written agreement on terms of engagement.