What is a spendthrift provision?

A spendthrift provision is a type of trust set up in Illinois that protects a beneficiary’s inheritance from creditors. In other words, the beneficiary cannot take the money out of the trust and give it to a creditor. This protects the beneficiary’s inheritance from being used as payment for debts. It is important to note that not all creditors may be restricted from accessing the funds; for example, child support payments, alimony, and federal taxes may still be paid from the trust. The spendthrift provision must be set up in the trust document when the trust is created, and the language in the document must be specific in order for the protection to be valid. It can restrict the beneficiary’s ability to transfer (or assign) the trust property to creditors, it can prevent creditors from seizing the trust assets, and it can prevent creditors from taking out loans against the trust. In short, a spendthrift provision is a type of trust that is used to protect a beneficiary’s inheritance from creditors. It is important to make sure that the trust document is set up correctly with the appropriate language in order for the trust to offer protection.

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