What is a spendthrift trust?

A spendthrift trust is a type of trust created to protect assets from being squandered or misused. It is often used for assets that could be vulnerable to creditors or other claimants. In California, the law allows someone who sets up a trust to state in the trust language that the beneficiary of the trust may not be able to directly access the trust principal. The beneficiary also may not be able to transfer their interest in the trust. This is to make sure that the assets are distributed in accordance with the trust grantor’s wishes. The trust instrument also typically designates a person, known as a trustee, who has the responsibility of managing and distributing the trust’s assets. The trustee must then use their best judgement when deciding how and when to distribute the trust assets to the beneficiary. This ensures that the beneficiary cannot misuse the trust assets without the trustee’s approval. In California, a spendthrift trust also protects assets from creditors and claimants. Even if someone was to sue a beneficiary for debts or other claims, that person could not access the trust assets. This type of trust is especially popular for protecting family assets from creditors or irresponsible beneficiaries.

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