Trusts are often used to protect family assets, but many people wonder whether those protections hold up if a spouse has debts or if the couple divorces.

In many cases, a properly structured trust can provide significant protection.

What Is a Spendthrift Trust?

A spendthrift trust includes language that restricts a beneficiary’s ability to transfer or pledge their interest in the trust.

This means the beneficiary generally cannot:

• Sell their future trust distributions
• Use the trust as collateral for loans
• Demand early distributions

These restrictions also limit the ability of creditors to access trust assets.

Protection From Creditors

In most situations, creditors cannot force the trustee of a spendthrift trust to distribute funds to satisfy the beneficiary’s debts.

Because the beneficiary does not directly control the assets, creditors typically cannot reach the trust principal.

However, once money is distributed to the beneficiary, those funds may become subject to creditor claims.

Divorce Considerations

Trust assets are often treated differently from marital property during divorce proceedings.

If a trust was established by a third party—such as a parent or grandparent—for the benefit of one spouse, those assets are frequently considered separate property rather than marital property.

That said, courts may examine factors such as:

• Whether trust funds were regularly used for marital expenses
• Whether the beneficiary had control over trust distributions
• The specific language of the trust document

Because these cases are highly fact-specific, the structure of the trust and the terms governing distributions are critical.

The Importance of Proper Trust Drafting

Not all trusts provide the same level of protection. Carefully drafted provisions—including discretionary distribution standards and spendthrift clauses—are essential for preserving asset protection.

Working with an attorney experienced in trust planning can help ensure that the trust achieves its intended purpose.