Originally published on April 6, 2025

If you’re planning your estate and want to leave assets to someone who may not manage money well—or if you want to protect those assets from creditors—a spendthrift trust can offer powerful protection. In Texas, spendthrift trusts are fully recognized by law and widely used for asset protection, especially in families concerned about financial responsibility, lawsuits, or divorce.

This article explains how spendthrift trusts work in Texas, what makes them effective, and why they’re a valuable tool for safeguarding wealth across generations.

What Is a Spendthrift Trust?

A spendthrift trust is a type of trust that includes a “spendthrift clause,” which prevents the beneficiary from accessing or assigning trust funds before they are actually distributed. This restriction also prevents creditors of the beneficiary from reaching the assets while they remain in the trust.

In other words, the trust assets are shielded until the trustee decides to make a distribution according to the terms of the trust. This can be especially helpful if the beneficiary:

  • Has poor financial judgment
  • Is going through a divorce
  • Is being sued
  • Has addiction, gambling, or mental health concerns
  • Receives government benefits that could be impacted by a lump sum inheritance

How Spendthrift Trusts Work in Texas

Under the Texas Property Code (§ 112.035), a properly drafted spendthrift clause prevents both voluntary and involuntary transfers of the beneficiary’s interest in the trust. This means:

  • The beneficiary cannot sell or assign their interest in the trust to someone else
  • Creditors cannot seize or garnish assets that are still held in the trust
  • The trustee has full discretion over when and how much to distribute

As long as the assets remain in the trust and have not yet been distributed, they are generally safe from lawsuits, judgments, and collection efforts.

Who Are the Parties Involved?

  • Grantor: The person who creates and funds the trust
  • Trustee: The person or institution responsible for managing the trust and making distributions
  • Beneficiary: The person who receives trust distributions, subject to the trustee’s discretion and the trust’s rules

In a typical setup, a parent (grantor) creates a spendthrift trust for a child (beneficiary), with another trusted person or institution serving as trustee. The trust may allow monthly distributions, payments for education or housing, or larger distributions upon reaching certain ages or life milestones.

What Can a Spendthrift Trust Pay For?

The trust document can outline broad or narrow purposes for distributions, such as:

  • Monthly living expenses
  • Tuition and educational costs
  • Medical care
  • Housing or rent
  • A wedding, business investment, or home down payment

Alternatively, the trustee can be given total discretion to distribute—or withhold—assets as they see fit, based on the beneficiary’s needs and behaviors.

What Creditors Are Blocked?

Spendthrift trusts in Texas protect trust assets from most types of creditors, including:

  • Credit card companies
  • Personal injury judgment creditors
  • Business-related debts
  • Divorcing spouses (in some cases)
  • Bankruptcy trustees (in most cases)

However, there are exceptions. Texas law allows certain creditors to reach trust distributions after they are made, including:

  • Child support and spousal maintenance obligations
  • Federal tax claims
  • Reimbursement claims for Medicaid and other public benefits

Even with these exceptions, the protections offered by a spendthrift trust are among the strongest available under Texas law.

Can the Beneficiary Be the Trustee?

It depends. If the beneficiary is also the trustee and has full control over distributions, courts may treat the trust as effectively revocable—and creditors may be able to access it.

To preserve protection, it’s best to appoint an independent trustee or co-trustee with distribution authority. This separation ensures the trust is respected as a genuine asset protection vehicle.

Revocable vs. Irrevocable Spendthrift Trusts

Spendthrift provisions can be included in both revocable and irrevocable trusts, but only irrevocable trusts offer creditor protection. In a revocable trust, the grantor can still change the terms or access the assets, so creditors can often reach them.

If you want to protect assets from your own creditors (rather than a beneficiary’s), you’ll need to create an irrevocable trust in which you are not the beneficiary and do not retain control.

Common Uses for Spendthrift Trusts

  • Estate planning for adult children who lack financial maturity
  • Shielding inheritances from lawsuits or divorces
  • Preserving assets for a beneficiary with special needs or government benefits
  • Protecting family wealth from one generation to the next

Spendthrift trusts are highly customizable and can be tailored to your family’s needs and values.

How Guerra Days Law Group Can Help

At Guerra Days Law Group, we help Texas families build strong estate plans that protect loved ones and preserve hard-earned wealth. If you’re considering a spendthrift trust, we can:

  • Draft a customized trust agreement with clear terms
  • Advise on trustee selection and administration
  • Coordinate your trust with wills, powers of attorney, and business interests
  • Guide you through the funding and long-term use of the trust

Whether you’re protecting a child’s inheritance or insulating assets from outside threats, our team will help you do it the right way—with confidence, clarity, and care.

Contact us today to schedule a consultation and start building your Texas spendthrift trust with experienced legal support.