What is a spendthrift trust?

A spendthrift trust is a type of trust created under California trusts and estates law. It is used to protect the assets of the trust from being taken by creditors of the beneficiary. The spendthrift trust is created when a settlor transfers legal title of the assets to a trustee to hold in trust for the benefit of a beneficiary. The beneficiary is not allowed to take possession of the property or the income generated by the trust until a predetermined time established by the terms of the trust. The trustee is given the power to manage the trust property and make distributions to the beneficiary in accordance with the settlor’s instructions. The major advantage of a spendthrift trust is that it can protect the beneficiary from creditors. The trust assets are not considered to be a part of the beneficiary’s personal property, so creditors are not allowed to go after the trust assets. This type of trust is also usually irrevocable, which means that the settlor cannot modify or revoke the trust once it is created. A spendthrift trust can be an effective way to protect the assets of a beneficiary from creditors, but it is important to note that these properties can still be subject to estate taxes and other taxes, including income taxes. It is also important to ensure that the trust is drafted properly so that the settlor’s wishes are carried out properly. An attorney familiar with California trusts and estates law should be consulted for assistance with setting up a spendthrift trust.

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