Spendthrift Restriction

A Spendthrift Restriction is a provision often included in a trust or will that protects a beneficiary’s interest in the trust assets from their own financial mismanagement or from creditors. This type of restriction prevents the beneficiary from transferring their rights to trust income or principal, effectively safeguarding the trust assets from being squandered, litigated, or seized for debts.

In a Spendthrift Trust, the trustee holds the authority to distribute funds to the beneficiary, but the beneficiary cannot demand the entire trust amount or use it as collateral for loans. This means that if the beneficiary faces bankruptcy or creditor claims, the assets within the trust remain shielded from those claims.

For example, if a parent establishes a trust for their child with a spendthrift restriction, the child may receive distributions for education or living expenses, but cannot access the entire trust principal or transfer their rights to it. If the child later encounters financial difficulties or irresponsible spending habits, the trust assets cannot be claimed by creditors, providing a layer of financial protection.

In Texas, including Houston, spendthrift provisions are recognized and enforceable, ensuring that trust assets remain protected as intended by the grantor. However, there are limitations, such as in cases of divorce or child support obligations, where courts may allow access to funds despite the spendthrift clause.