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 New York, a spendthrift trust is a legal tool used to protect the assets of a trust from being squandered by a beneficiary who may not be financially responsible. Under New York law, specifically the New York Estates, Powers & Trusts Law (EPTL), spendthrift provisions are recognized and enforceable. These provisions prevent the beneficiary from transferring their interest in the trust, either voluntarily or involuntarily, thus safeguarding the trust assets from the beneficiary's creditors. A spendthrift trust ensures that the trust funds are used according to the grantor's intentions and are distributed over time or under conditions set by the grantor. Creditors of the beneficiary generally cannot reach the assets in the trust to satisfy the beneficiary's debts, except in certain circumstances such as claims for child support, alimony, or services provided to protect the beneficiary's interest in the trust. It is important for individuals considering setting up a spendthrift trust to consult with an attorney to ensure that the trust is properly established and meets all legal requirements.