Trust Spendthrift Provisions
November 22, 2010
Current economic conditions are focusing additional attention on so-called “spendthrift” provisions routinely included in trust documents. These spendthrift provisions are intended to prevent beneficiaries from assigning and creditors from attaching the interest of beneficiaries in the trust.
Many trusts provide for distribution of trust income on some periodic basis as a required distribution and frequently gives discretion to the trustee to distribute additional amounts from principal, sometimes with and sometimes without a “standard,” such as “health, education and support.”
The Arizona Trust Code’s spendthrift statutes protect both required and discretionary distributions from assignment and attachment before the distribution is received by the beneficiary. However, as soon as a distribution is received the creditor or assignee could take it.
This brief overview of some important considerations associated with the trust spendthrift provisions is by no means comprehensive. Always seek the advice of a competent professional when making important tax planning decisions.