4 Creditors Not Subject to Spendthrift Trust Provisions

 

Related Links:

As part of the many tools used in creating an estate plan, an individual may choose to use a spendthrift trust to protect assets from creditors of his beneficiaries. Unless spendthrift provisions are incorporated, a beneficiary can generally transfer his interest in the trust. If this is the case, a creditor can obtain a court order to force the beneficiary to transfer his interest in the trust to the creditor. However, trusts that incorporate spendthrift provisions prevent the beneficiaries from transferring their interests in order to protect the assets from their creditors.

Four Creditors Free From Spendthrift Provisions

While in many cases a spendthrift trust will successfully accomplish the goal of protecting assets from the creditors of beneficiaries, there are exceptions. Spendthrift provisions will not restrict certain types of creditors when it comes to seeking repayment for the debts that are owed by the beneficiary. The following are four such types of creditors:

  1. Creditors seeking payment for providing the basic necessities of life to the beneficiary, such as food or shelter.
  2. Judgment creditors seeking payment for child support or alimony.
  3. Claims for taxes by the state and federal governments.
  4. Judgment creditors who have provided services that protected the beneficiary’s interest in the trust.

As a trustee of a spendthrift trust, you must be very careful during the trust administration process in order to ensure that you are properly complying with any rules or laws relating to creditors. The experienced attorneys at the Grossman Law Firm can help. Learn more about how we have helped other clients firsthand—view our client testimonials page today!

 
Scott Grossman

Scott Grossman

Attorney

The Grossman Law Firm, APC · 525 B Street, Suite 1500, San Diego, CA 92101 · (951) 523-8307