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 South Dakota, a spendthrift trust is a legal tool that allows a grantor to place assets in a trust with specific provisions that prevent the beneficiary from squandering the assets. South Dakota Codified Laws (SDCL) recognize the validity of spendthrift provisions in trusts. According to SDCL § 55-1-13, a provision restraining the voluntary or involuntary transfer of a beneficiary's interest is valid unless it is proven that the provision was inserted with the intention of defrauding creditors or others. This means that the assets in a spendthrift trust are generally protected from the claims of creditors, and the beneficiary cannot use them as collateral for a loan or assign them to someone else. South Dakota's trust laws are considered favorable for the creation of trusts, including spendthrift trusts, due to their strong asset protection features and the state's commitment to upholding the intentions of the grantor in establishing the trust.