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 Michigan, a spendthrift trust is a legal tool used to protect the assets of a beneficiary from their own potentially irresponsible spending and from creditors. Michigan law, specifically the Michigan Trust Code, allows for the creation of spendthrift trusts. These trusts contain a spendthrift provision that restricts the beneficiary's ability to voluntarily or involuntarily transfer their interest in the trust assets. This means that beneficiaries cannot use their interest as collateral for loans, nor can creditors reach these assets to satisfy debts of the beneficiary. The spendthrift provision is effective as long as it does not violate public policy or statutory law, and it is intended to ensure that the trust assets are used for their intended purpose, such as the beneficiary's support or education, rather than being squandered or seized by creditors.