Spendthrift Provision

A spendthrift provision is a specific clause included in a trust or will that is designed to protect the assets of a beneficiary from creditors and themselves. This provision restricts the beneficiary’s ability to access trust funds directly, thereby preventing them from squandering the assets through reckless spending or misuse.

The spendthrift provision operates by allowing the trustee to have control over the distribution of trust assets, meaning that the beneficiary cannot demand a lump sum or immediate access to the funds. Instead, the trustee can distribute assets at their discretion, often in accordance with predetermined terms that align with the intent of the grantor (the person who created the trust). This can include stipulations such as regular disbursements for living expenses, education, or health care.

For example, if a trust includes a spendthrift provision, a beneficiary who has a history of financial irresponsibility would not be able to withdraw large sums of money at once. Instead, the trustee could provide monthly payments, ensuring that the beneficiary has funds available for essential needs while safeguarding the remainder of the trust assets from potential creditors or poor financial decisions.

In Texas, particularly in Houston and surrounding areas, spendthrift provisions are recognized and enforceable, offering additional protection to trust assets. They can be a crucial tool in estate planning, especially for families concerned about beneficiaries who may not handle finances responsibly.