Spendthrift Clause Enforceability in Trusts
A spendthrift clause is a provision in a trust which prohbits a beneficiary’s interest from being assigned and prevents a creditor from attaching that interest. Bruce G Robert QTIP Marital Trust v. Grasson, 332 S.W.3d 248, 256 (Mo. Ct. App. 2010). What this means is that the beneficiary cannot voluntarily assign out the interest in the trust to a third-party or use it as collateral for a loan. It further generally means that a beneficiary’s creditor cannot collect on any liabilities owed by the beneficiary by collecting against the beneficiary’s interest in the trust. The purpose of the spendthrift clause, then, is to ensure that the trust is used solely for a beneficiary, not any third-party creditor.
While spendthrift clauses in Missouri are generally permissible, the creation and application of spendthrift clauses does have limits. Specifically, a spendthrift provision will only be upheld so long as it does not run counter to a statute or public policy. Elec. Workers v. IBEW-NECA Holiday Trust Fund, 583 S.W.2d 154, 157 (Mo. 1979). As an example from a prior case, the Missouri Supreme Court has found that a spendthrift clause which purported to prevent garnishment was contrary to the garnishment statute(s) and was thus against public policy. Id. at 161.
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