It also prevents the beneficiary from squandering all of the trust's assets overnight, because the beneficiary is able to receive the money only under terms you prescribe. A properly drafted spendthrift clause can be an enormous advantage to any beneficiary caught in the throes of divorce, unemployment, creditor problems or any stretch of bad luck. Of course, few things in the law are simple and straightforward. Spendthrift statutes and regulations vary widely from state to state. A few states follow the old English common law rule, which does not permit spendthrift provisions.
Many jurisdictions allow suppliers of life's necessities to make claims against the trust.
Several states also permit the enforcement of spousal and child support judgments. There is a division among the states regarding the protection of spendthrift trust funds from lawsuits by parties injured by the trust beneficiary, like auto accident victims. The trend of cases seems to be in favor of injured plaintiffs, but the matter has not been definitively decided in most jurisdictions. And sorry, but the spendthrift trust funds will not be immune from the claims of the IRS or the states for tax liabilities. I recall a case where a man on his deathbed was about to leave a simple will dividing equally between his two sons everything he owned.