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 Indiana, a spendthrift trust is a legal tool used to protect a beneficiary's interest in a trust from creditors and from the beneficiary's own potentially imprudent spending. Under Indiana law, specifically Indiana Code Title 30, Article 4, Chapter 2 (IC 30-4-2), a spendthrift provision is enforceable. This provision can restrict the beneficiary's ability to voluntarily or involuntarily transfer their interest in the trust and can prevent creditors from reaching the trust assets to satisfy the beneficiary's debts, with certain exceptions such as claims for child support or alimony. The trust must be properly established and the spendthrift provision must be clearly stated in the trust document to be effective. It is important for individuals considering the creation of a spendthrift trust to consult with an attorney to ensure that the trust is properly drafted and meets all legal requirements.