Why Add a Spendthrift Clause? Shielding Heirs from Creditors
Are your heirs prepared to keep creditors at bay when their inheritance arrives? Without the right language in a trust, wealth can leave the family more quickly than it was acquired.
At Commonwealth Life and Legacy Counsel, we help Central Virginia families draft plans that keep assets safe and on track for the next generation. In the lines below, we explain how a spendthrift clause adds a strong layer of protection for your loved ones.
Benefits of Including a Spendthrift Clause
A well-written spendthrift provision does more than block unwanted claims. It guides heirs toward wise money habits and keeps family wealth intact.
Protecting Assets from Creditors
A spendthrift clause stops creditors from grabbing trust property while that property is still held by the trustee. Creditors must wait until cash or other assets reach the beneficiary’s pocket before trying to collect. Picture a beneficiary with heavy credit-card debt: the clause keeps the inheritance safe inside the trust, so the debt collector cannot seize it early.
That shield stays in place because the beneficiary cannot pledge or assign future payments to anyone else. In short, the creditor has no legal hook until funds leave the trustee’s hands.
Encouraging Responsible Financial Management
Protection is only half the story. A spendthrift clause can also shape healthier money choices by slowing the flow of cash.
Grantors often direct the trustee to distribute funds only when certain needs arise, such as:
- Medical or dental care
- Tuition and job training
- Basic living costs like housing or groceries
If desired, the trust can even ask the trustee to check whether the beneficiary holds steady employment or meets another milestone before releasing funds. This structure nudges heirs toward budgeting and goal-setting rather than impulse shopping.
Preserving Family Wealth
Delayed or controlled payouts help wealth outlast a single generation. Because heirs receive smaller installments, investments inside the trust keep growing over time. That longer horizon often leads to better financial discipline as children and grandchildren learn to think past quick gratification.
Shielding Assets During Divorce or Relationship Changes
Money placed in a spendthrift trust usually remains outside the pool of marital property during a divorce. A soon-to-be ex-spouse cannot grab trust assets that still sit under the trustee’s control. The clause can also direct any unused balance to grandchildren rather than a former spouse if the original beneficiary dies first.
This combination of creditor and divorce protection shows why one short paragraph in a trust can carry outsized value.
How Spendthrift Provisions Function
Virginia follows the Uniform Trust Code, which recognizes spendthrift language as long as certain wording is present. The clause bars both voluntary and involuntary transfers of the beneficiary’s interest. Because the interest cannot be sold, promised, or attached, a creditor faces a dead end until distribution day.
That legal wall works only while the funds stay inside the trust. Once money lands in the heir’s personal bank account, the usual collection rules apply. Thoughtful distribution schedules and trustee discretion keep the wall standing for as long as the grantor wants.
Limitations and Exceptions to Spendthrift Clauses
No legal tool is flawless, and spendthrift language is no exception. Certain claims can still reach trust assets even with the clause in place.
| Type of Claim | Why the Shield Fails | Typical Outcome |
| Past-due child support | Virginia courts treat support obligations as a top priority | Judge can order payments from future distributions |
| Past-due spousal support | Similar public policy concern as child support | Funds released only to cover the support amount |
| Federal or state tax debts | Sovereign claims outrank private contracts | Taxing authority can reach distributions or, in rare cases, trust corpus |
Another limit involves “self-settled” trusts. In most situations, you cannot place your own assets in a trust, retain a right to benefit, and still block your personal creditors with a spendthrift clause. A handful of states allow that structure, but Virginia does not.
Because the shield has edges, every word of the clause matters. Loose phrasing can open doors that were meant to stay closed.
Drafting Considerations for Spendthrift Clauses
Getting the wording right usually calls for skilled legal guidance. Even a small gap can weaken the protection.
- Use clear language. The clause should state that neither the beneficiary nor creditors have any right to transfer or claim an interest in the trust while the assets remain with the trustee.
- Grant broad trustee discretion. When the trustee decides if and when to pay, courts are less likely to order forced distributions.
- Avoid mandatory support clauses. If the trust promises the beneficiary “enough for support,” a court might view that promise as available income for a creditor.
- Add an independent trustee. Someone without a personal stake can follow the trust terms without pressure from the beneficiary.
These points show why “boilerplate” language from the internet rarely delivers the safety families expect.
Could a Spendthrift Clause Benefit Your Beneficiaries?
Parents often worry that rising debt, sudden lawsuits, or plain old inexperience will chip away at future inheritances. A spendthrift clause gives breathing room while heirs gain maturity, pay down liabilities, or build money skills. The clause can help:
- An heir still in college or graduate school
- Adult children with entrepreneurial dreams and business loans
- Family members facing heavy medical bills or injury claims
By slowing access and blocking premature transfers, the provision keeps creditors in check and encourages thoughtful spending.
Protect Your Legacy: Contact Commonwealth Life and Legacy Counsel
You worked hard for what you own, and you want it to strengthen the people you love rather than pay off strangers. We can draft trusts that guard against creditor claims and promote sound money habits. Call us at 434-589-2958 for the Troy office or 804-598-1348 in Powhatan, email info@winget-hernandez.com, or visit our Contact Us page to start the conversation. A brief meeting today can help safeguard your family’s resources for decades.