What is a spendthrift provision?

A spendthrift provision is a clause in a trust or will which prevents a beneficiary from using their inheritance in a way that will deplete it, or from transferring it to someone else. The provision is meant to protect the beneficiary from themselves, preventing them from financially harming themselves by misusing a large sum of money that they may not have experience in managing. In Maryland, a spendthrift provision will generally set forth the terms of how the beneficiary is not allowed to spend or transfer the funds. For example, the beneficiary may not be allowed to borrow against the funds or make large purchases without first consulting a trustee. Or the beneficiary may not be allowed to sell the assets without the approval of the trustee. Spendthrift provisions can be used to protect minors from misusing money and prevent irresponsible use of money by beneficiaries with addiction or mental health problems. It can also be used for the long-term protection of a beneficiary who may not yet have the experience to make responsible financial decisions. Ultimately, spendthrift provisions are designed to ensure that the money and assets of a trust or an estate are used for their intended purpose—to provide for the beneficiary in a way that meets their needs.

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