Willow Creek Law, LC
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Sandy, Utah 84093
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Spendthrift Trust

Elderly couple purchasing life insuranceUnder Utah law, a trust that contains “spendthrift” provisions is enforceable. This means that if the beneficiary–someone standing to inherit money or something else–named under the trust has creditors seeking money from him or her, the spendthrift clause can protect the beneficiary’s interest in the trust from those creditors under certain situations.

For example, let’s picture a woman is creating a trust and has three children and one of them has, say, a landlord seeking payment of rents and she doesn’t want to leave an inheritance to that child, only to see the money go to the landlord. Utah law permits her to leave that money in a spendthrift trust, which may bar the creditors from getting at that money.

Without spendthrift provisions, the creditor would be able to go after distributions from the trust to the beneficiary. But if there are spendthrift provisions that prevent both voluntary and involuntary transfers of the beneficiary’s interest, the trustee of the trust would not be allowed to pay the distribution to the creditors. There are some exceptions (such as for child support), but that’s the general rule.

The law seems to encourage those who want to leave money for someone else to be able to protect that money from creditors in many situations.

 


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