Spendthrift Clause

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A spendthrift clause refers to a clause creating a spendthrift trust which limits the ability of assets to be reached by the beneficiary or their creditors. A spendthrift trust usually requires the trustee to only give a certain amount of income to the beneficiary, and often spendthrift trusts do so to prevent a financially unstable beneficiary from mismanaging the funds. Beneficiaries and their creditors cannot usually place liens or other judgments on the assets of the trust themselves, but a creditor may get a garnishment against the payments to the beneficiary. Not every state recognizes spendthrift trusts, and the ones that do differ on allowing exceptions that allow creditors to gain trust assets in certain situations. 

[Last updated in August of 2021 by the Wex Definitions Team]