What is a Texas spendthrift trust?
The Texas Property Code authorizes a Texas spendthrift trust. It is set up by the “grantor.” The trust will name one or more “beneficiaries” of the trust property. The beneficiaries will receive the trust property at a given time, i.e., reaching the age of 35. Sometimes, a trust will exist for a beneficiary’s life, with the property going to his children when he dies. A trust is administered by a trustee who may also be one of the beneficiaries. However, if the trustee and the beneficiary are the same person at any time, the trust ends.
Such trusts usually pay for the “health, support, maintenance and education” of the beneficiary to take care of the beneficiary’s needs during the existence of the trust.
Protection from creditors
A Texas spendthrift trust is a trust set up to protect the beneficiary from his creditors. For instance, there is a child who does not manage his property correctly, so he is always being sought by his creditors to pay his bills. His parents want to leave him property but are afraid that his creditors will get the property because of the mismanagement of the child.
A Texas spendthrift trust is the answer. In its most basic form, a Texas spendthrift trust provides for the child but is not available to the child’s creditors. A creditor can sue the child but cannot get to the assets of the trust.
A person cannot set up a Texas spendthrift for themselves. However, some states do allow a person to create a spendthrift trust for themselves.