Spendthrift Provisions

A spendthrift is someone who spends freely and may use up their money. The recording uses a familiar family situation: a parent wants to leave wealth to a child, but also wants to protect that child from spending it all.

A trust can put rules around distributions—the money or property it pays out. Some rules can be firm, such as waiting until a child finishes school. Others can give the trustee discretion, meaning the trustee must use judgment within the trust’s terms.

The recording uses these examples to introduce the broader idea of protective trust provisions. In legal terms, a spendthrift provision restricts the transfer of a beneficiary’s interest. It can limit the beneficiary’s ability to give that interest away and can limit some creditors from reaching it.

That is why the concept matters beyond a child’s spending habits. A beneficiary may receive permitted benefits while the assets remain subject to the trust’s protective rules.

There are limits and exceptions. Rules about distributions and spendthrift protection are related, but they are not the same rule. And special issues arise when the person who puts in the assets is also the beneficiary. That leads to the next concept: a self-settled trust.