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Simple English definitions for legal terms
Spendthrift Trust
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A quick definition of Spendthrift Trust:
A spendthrift trust is a special type of trust that helps protect the money or property that someone leaves for another person. The person who gets the money or property can't sell it or give it away, and someone else called a trustee is in charge of taking care of it. This means that if the person who gets the money or property owes money to someone else, that person can't take the money or property to pay off the debt.
A more thorough explanation:
A spendthrift trust is a type of trust that is created to protect the beneficiary's assets from creditors. The trust is designed so that the beneficiary cannot sell or give away their interest in the trust property. Instead, a trustee is appointed to manage the property on behalf of the beneficiary.
For example, let's say that John creates a spendthrift trust for his daughter, Jane. The trust is funded with $1 million in assets. John appoints a trustee to manage the assets and distribute them to Jane as needed. However, Jane cannot sell or give away her interest in the trust property. This means that if Jane has creditors, they cannot reach the assets in the trust to satisfy their debts.
Another example of a spendthrift trust is a trust created for a person with a gambling addiction. The trust can be designed to provide the beneficiary with a regular income, but the trustee would have control over the assets to prevent the beneficiary from using the funds to gamble.
In summary, a spendthrift trust is a useful tool for protecting assets from creditors and ensuring that the beneficiary is not able to sell or give away their interest in the trust property.