The Spendthrift Clause is an important and integral component of your Living Trust. This clause protects future Trust benefits from most creditors and spouses, as well as limiting how the beneficiary can reach assets. This provision helps protect a beneficiary who may not be the most financially responsible, for one reason or another. The beneficiary will be unable to spend or borrow against the funds of the Trust. This prevents the beneficiary from selling all of the assets within the Trust, as well as using the Trust as collateral for a loan.

The goal of this clause is to set limits for the beneficiary. The beneficiary also cannot change the way in which the Trust distributes its assets. For example, if the Trustee decides that the beneficiary will receive $500 a month, then the beneficiary cannot alter this. However, the beneficiary is free to do with the $500 as they wish; no limits are imposed on this.

Spendthrift Clause Protections and Decisions

The Spendthrift Clause also does not protect against all forms of debt. It cannot protect against child support and other debts related to life’s necessities. You must pay these debts, and you can be confident that it can be used to do this. However, this does not apply to other forms of debt; the Trust is protected from those.

It is important to mention that the Trustee is in charge of all decisions regarding the Trust. They must set how much the beneficiary will receive and in what way, based on their discretion and taking into consideration all other resources available to the beneficiary. The Spendthrift Provision protects the Trust somewhat, but it is still up to the Trustee to determine the distribution.

More than an Estate Plan.

A Living Trust is much more than just an estate plan. Among other lifelong benefits, it protects your beneficiaries after you die in a variety of essential ways.

To that end, don’t hesitate to get in touch with us today for further information if you have any questions about Guardianship, Power of Attorney, Living Trusts, or other areas of concern.

Dylan Hunn is Communications Director at Tuohy Law Offices.

Dylan Hunn

312-559-8400
17W220 22nd Street
Oakbrook Terrace, Illinois, 60181

This blog entry is for information and planning purposes. Therefore, it is not legal advice. Please do not use this blog as legal advice, which turns on specific facts and laws in specific jurisdictions. No reader of this blog should act or refrain from acting based on any information included in, or accessible through, this blog without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the reader’s state, country, or other appropriate licensing jurisdiction.

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