A spendthrift trust is a trust in which the person who makes the trust and places property or assets in it (the grantor, settlor, or trustor) includes a provision that prohibits the beneficiary’s interest in the trust from being assigned to another person or entity—whether as a gift or as collateral for a loan or debt—and prevents a creditor from reaching or attaching the beneficiary’s interest in the trust.

A spendthrift is a person who spends money wastefully or foolishly and a spendthrift provision in a trust (a spendthrift trust) is designed to preserve the trust’s assets and protect the beneficiary from the beneficiary’s spendthrift ways.

In Alabama, a spendthrift trust is a legal tool used to protect the assets of a beneficiary from their own potentially irresponsible spending and from creditors. Under Alabama law, specifically Alabama Code Title 19. Fiduciaries and Trusts § 19-3B-502, a spendthrift provision is a term of a trust that restricts the voluntary and involuntary transfer of a beneficiary's interest. This means that beneficiaries cannot sell, give away, or use their interest in the trust as collateral for a loan. Additionally, creditors are generally unable to reach the beneficiary’s interest to satisfy debts. However, there are exceptions to this protection, such as claims by a beneficiary's child, spouse, or former spouse for support or alimony, or claims by a creditor who has provided services for the protection of a beneficiary's interest in the trust. It's important to note that the creation and administration of spendthrift trusts must comply with state law and that an attorney can provide guidance specific to individual circumstances.