SPENDTHRIFT TRUST
Back to GlossaryDefinition
A trust that gives absolute control of the income and principal to the trustee to prevent the beneficiary from squandering money.
Summary
A spendthrift trust is a protective legal arrangement where a trustee has complete discretionary control over trust assets, preventing beneficiaries from accessing or wasting the money irresponsibly. Unlike regular trusts where beneficiaries might have certain rights to distributions, spendthrift trusts include specific provisions that protect the assets from the beneficiary's creditors and poor financial decisions. The trustee can decide when, how much, and under what circumstances to distribute income or principal to the beneficiary, making it an effective tool for protecting family wealth across generations.
Usage Context
This term is crucial when studying estate planning, family wealth preservation, asset protection strategies, and trust law. Understanding spendthrift trusts is essential for analyzing how families protect wealth from creditors and irresponsible spending patterns across generations.
Common Confusions
- Thinking the beneficiary has any legal right to demand distributions
- Confusing it with a discretionary trust (they're very similar but spendthrift trusts specifically protect against creditors)
- Believing the creator can set up a spendthrift trust for themselves
- Assuming all trusts provide the same level of asset protection
- Misunderstanding the trustee's liability and decision-making authority
