Spendthrift trust

Spendthrift Trust

Spendthrift trust

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Description:
A spendthrift trust is a trust that is created for the benefit of a person (often because he or she is unable to control spending) that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit of the beneficiary. Creditors of the beneficiary generally cannot reach the funds in the trust, and the funds are not actually under the control of the beneficiary.

The creator of a trust (whether or not it is a spendthrift trust) is sometimes called the "trustor", "grantor" or "settlor" of the trust. A trust often will not be treated as a spendthrift trust unless the trust agreement contains language showing that the creator intended the trust to qualify as spendthrift. This is what is known as a spendthrift clause or spendthrift provision.

A spendthrift provision in an irrevocable trust prevents creditors from attaching the interest of the beneficiary in the trust before that interest (cash or property) is actually distributed to him or her. Most well drafted irrevocable trusts contain spendthrift provisions even though the beneficiaries are not known to be spendthrifts. This is because such a provision protects the trust and the beneficiary in the event a beneficiary is sued and a judgment creditor attempts to attach the beneficiary's interest in the trust.

Benefits of a

For example, the Nevada Property Code provides:

A. There is no personal or corporate income tax imposed by the state of...
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