Spendthrift Clause Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Spendthrift Clause, written in plain English, along with examples of how it is used.

What is Spendthrift Clause?

(n) spendthrift clause is a provision included in a will, which dishonor the claims against the property gifted by that will, which has been pledged, mortgaged or otherwise transferred in anticipation, by the person to whom such gifts were proposed in the will. For example a beneficiary in a will agree to sell the property he is going to get as per the will and receives consideration. By spendthrift clause the buyer of such property cannot claim the property even after the will is effected

History and Meaning of Spendthrift Clause

A spendthrift clause is a provision included in a will, trust or other legal document that restricts an individual's ability to transfer or assign property that is owned by the estate. Generally, a spendthrift clause is designed to protect beneficiaries from themselves by preventing them from engaging in activities that would dilute their inheritance, such as the sale or gifting of assets. These clauses are sometimes used in situations where a beneficiary may be in debt or susceptible to financial mismanagement.

Spendthrift clauses have been used for many years in estate planning, and they are recognized in most jurisdictions. While these clauses can help protect beneficiaries, they can also be complicated, and they may not always be enforceable. An experienced attorney can help you determine if a spendthrift clause is appropriate for your situation.

Examples of Spendthrift Clause

  1. A grandfather sets up a trust for his grandchildren with a spendthrift clause, so they cannot sell the assets, and only the income can be distributed to them.

  2. A person sets up a trust with themselves as the beneficiary but includes a spendthrift clause to prevent themselves from using the trust assets to satisfy their creditors.

  3. A person's will includes a spendthrift clause to ensure that their assets are protected from their beneficiary's creditors.

Legal Terms Similar to Spendthrift Clause

  1. Trustee: the person or entity responsible for managing the assets held in a trust.

  2. Beneficiary: a person or entity that receives assets from a trust.

  3. Executor: the person responsible for administering the estate of a deceased person.

  4. Probate: the legal process of administering the estate of a deceased person.