Austin Trust Lawyers

Understanding Spendthrift Trusts

Many people have difficulties in spending money responsibly—especially when they suddenly come into a large sum of money, such as when a trust fund matures. The desire to quickly spend this money can be tempting for even the most responsible individuals.

A spendthrift trust is a specific type of trust that controls how much money a beneficiary is allowed to have and what they are allowed to use it for.

The person who creates a trust, usually called a trustor, grantor, or settlor, must explicitly state that the trust should be regarded as a spendthrift trust, or else it will be regarded as an ordinary trust. The easiest way to ensure that a trust is understood to be a spendthrift trust is for the trustor to include a “spendthrift clause” or “spendthrift provision”.

When a spendthrift trust is designated as such, an independent trustee retains full authority over the funds in the trust, and it is his or her responsibility to disperse funds at their discretion to the beneficiary. The beneficiary’s creditors do not have access to any of the funds in the trust, as the trust itself is not really under the control of the beneficiary.

In some very specific situations, certain types of creditors may be able to receive payment from a trust if they supply the beneficiary with “necessities” (i.e. food, shelter, child support, alimony).

If you would like more information on trusts or on setting up a trust, contact the Austin trust lawyers at the law firm of Slater, Kennon & Pugh LLP. today by calling 512-338-1100.