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 Wisconsin, a spendthrift trust is a legal tool that allows a grantor to place restrictions on a beneficiary's access to trust assets, thereby protecting those assets from the beneficiary's potential imprudent spending and from the claims of creditors. Wisconsin Statutes section 701.06 specifically addresses spendthrift provisions, stating that a beneficiary may not transfer an interest in a trust in violation of a valid spendthrift provision, and that creditors or assignees of the beneficiary cannot reach the interest or a distribution by the trustee before its receipt by the beneficiary. This means that the assets within a spendthrift trust are generally shielded from the beneficiaries' creditors until the assets are distributed out of the trust. However, there are exceptions to this protection, such as claims for child support or alimony, and certain claims by the government. It's important to note that while spendthrift trusts can offer significant asset protection for beneficiaries, they must be properly structured and operated in accordance with both state law and federal regulations to ensure their effectiveness.