The Basics of a Florida Spendthrift TrustPosted September 14, 2015 in Florida Trust Litigation
The Basics of a Florida Spendthrift Trust:
What is a Florida Spendthrift Trust?
In Florida, a person can create a trust with a variety of different protections and limitations. One of those types of protections is called a “spendthrift trust,” which which limits the ability of a beneficiary to alienate property.
The Florida Trust Code defines a spendthrift trust as a “trust that restrains both voluntary and involuntary transfer of a beneficiary’s interest.” § 736.0103, Fla. Stat. (2015)
In the most general sense, a spendthrift trust permits the grantor (the person creating the trust) to provide support and maintenance for a beneficiary, while restricting that beneficiary’s ability to waste funds or sell assets in the trust.
A spendthrift trust provides two specific benefits. The trust protects a beneficiary from potentially harming themselves, but also protects the trust assets from any of the beneficiary’s creditors.
Although Florida law recognizes the validity of spendthrift provisions, it is important to note that the provision is valid only if it restrains both the voluntary and involuntary transfer of a beneficiary’s interest. § 736.0502, Fla. Stat. (2015).
What does a grantor need to do to create a spendthrift trust?
In order to create a spendthrift trust, a grantor must clearly manifest his or her intent to restrain the beneficiary from alienating his or her interest.
Can a beneficiary transfer their interest in a spendthrift trust?
The short answer is no, but a spendthrift trust does not prevent the appointment of a trust interest through the exercise of a power of appointment.
Can any creditors invade a spendthrift trust?
Although a spendthrift trust generally protects against creditors, there are exceptions to this general rule. A spendthrift provision is unenforceable against the following:
(a) A beneficiary's child, spouse, or former spouse who has a judgment or court order against the beneficiary for support or maintenance.
(b) A judgment creditor who has provided services for the protection of a beneficiary's interest in the trust.
(c) A claim of this state or the United States to the extent a law of this state or a federal law so provides.