Spendthrift Clauses: Trusts & Debts

One of the big misconceptions with a trust is that when property and assets are placed in a trust they are beyond the reach of creditors. This is not always the case. Generally, a judgment creditor of a beneficiary may, without court order, reach a beneficiary’s interest by attachment of present or future distributions to or for the benefit of the beneficiary. See Section 456.5-501, RSMo.
An exception to this rule is a spendthrift clause, which is language in a trust that purports to exempt trust assets from being used to satisfy a judgment creditor’s debt. Under a spendthrift arrangement, therefore, the funds are not controlled by the beneficiary and are left in the trustee’s control and discretion. For policy reasons, spendthrift provisions are not valid in every circumstance. Understandably, a beneficiary’s child, spouse, or former spouse can recover against a beneficiary’s interest in a trust — regardless of the existence of a spendthrift clause — to recover for outstanding child support or maintenance/alimony. See Section 456.5-503, RSMo. Spendthrift clauses are further generally inapplicable to claims made by the State of Missouri or Federal Government (e.g., for outstanding taxes).
Contact us with questions.