What is a Spendthrift Trust?
A Spendthrift Trust or a Spendthrift Provision in a Trust Deed prohibits the beneficiary’s interests from being assigned and hence protects the beneficiaries from creditors. Most of the assets in the Trust will be safe from banks or creditors. However, creditors can still collect any money paid directly to the beneficiary from the Trust. If an individual thinks that his beneficiary could have problems with creditors, he can give the Trustee broad control over the Trust. The Trustee may be instructed by the Trust to withhold income and/or principal from the beneficiary. For maximum effectiveness, a Spendthrift Trust should be irrevocable. It must also give the Trustee full discretion over the assets of the Trust, so the Trustee will have full power in deciding when and how much money should be given to the beneficiary. Question: What is a Totten Trust? Answer: A Totten Trust is a revocable trust created by one’s deposit of money in one’s own name as a Trustee for another. A Totten Trust
A Spendthrift Trust helps to protect the beneficiary from creditors. Most of the assets in the Trust will be safe from banks or creditors. However, creditors can still collect any money paid directly to the beneficiary from the Trust. If you think that your beneficiary could have problems with creditors, you can give the Trustee broad control over the Trust. The Trustee may be instructed by the Trust to withhold income and/or principal from the beneficiary. For maximum effectiveness, a Spendthrift Trust should be irrevocable. It must also give the Trustee full discretion over the assets of the Trust, so the Trustee will have full power in deciding when and how much money should be given to your beneficiary.
