Spendthrift Trust
A trust that protects the beneficiary's interest from creditors and prevents the beneficiary from selling or pledging their future trust distributions. It is designed for beneficiaries who might not manage money wisely.
Legal Definition
A trust containing a provision that restrains both the voluntary and involuntary transfer of a beneficiary's interest, thereby preventing the beneficiary from assigning or encumbering their interest and protecting it from the claims of the beneficiary's creditors.
Practical Example
Grandpa creates a spendthrift trust for his grandson who has a gambling problem. The trustee distributes money monthly for living expenses, but the grandson cannot borrow against future trust payments or access the principal directly.