What is a spendthrift trust?

A spendthrift trust, also known as a “spendthrift provision,” is a legal agreement in which a trustor transfers money or assets to a trustee, who then holds and manages those assets for the benefit of a beneficiary. The spendthrift trust is designed to protect the beneficiary’s assets from creditors and other claimants who might otherwise try to take them. In Pennsylvania, a spendthrift trust is regulated by the state’s version of the Uniform Probate Code, which allows the trustor to limit a beneficiary’s ability to transfer or encumber the assets held by the trust. It also provides additional protections for beneficiaries by requiring that they be given notice of the trust, and by restricting the trustor’s ability to amend, revoke, or terminate the trust. Spendthrift trusts are commonly used by individuals who wish to protect their assets from creditors or who may not be the most reliable or responsible with their own finances. In some cases, they may also be used to pass assets from one generation to the next, ensuring that the assets are preserved for future generations, even if the beneficiary is unable to handle them responsibly.

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