What is a spendthrift provision?

A spendthrift provision is a legal term used in terms of trusts and estates law in Texas. It is a clause that provides protection for the assets of a trust from being able to be collected on or taken away by the beneficiaries’ creditors. In other words, the beneficiary of the trust is not allowed to transfer away or sell any of the assets given to them through the trust. The assets are then protected from any future creditors who may try to collect funds from the beneficiary. This is accomplished by creating a trust and specifying the spendthrift provision as part of the trust. Its origin can be traced back to common law, where it was used to protect the rights of the settlor from creditors and much more. When used in Texas, a spendthrift provision can be used to protect beneficiaries of a trust from creditors, insolvency, bankruptcy, and other legal claims. The spendthrift provision must be included in the trust document in order to be legally enforceable. In addition, the spendthrift provision also ensures that the trust assets, and the beneficiary’s interest in them, cannot be assigned, encumbered, or alienated away from the beneficiary. If the assets are assigned, encumbered, or alienated, then the court will void the transaction as illegal. This is done to protect the trust assets from being misused by the beneficiary.

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