Asset protection is a big reason individuals will sometimes create a trust. A lot of the focus in such situations is on making sure a beneficiary’s interest in a trust estate is outside the purview of creditors. To that end, trusts often utilize spendthrift provisions. A spendthrift provision is language in a trust that prevents a beneficiary from voluntarily or involuntarily assigning his/her interest in the trust property. Subject to specific exceptions (e.g., Section 4565-503.2, RSMo), spendthrift clauses are usually enforceable in Missouri.
Trust assets also cannot be used to satisfy the personal obligations of a trustee — even if the trustee becomes insolvent or bankruptcy. Section 456.5-507, RSMo. Things can get confusing when the same person is the trust-maker, trustee and beneficiary in terms of whether a creditor can seek to collect trust assets to satisfy a debt. Accordingly, it is important to review the facts and circumstances of the claim, as well as the legal basis for the claim, to determine whether trust assets are subject to a creditor’s collection efforts.