What Makes a Spendthrift Provision Valid
A spendthrift provision is a clause written into a trust that limits what a beneficiary can do with their interest before receiving it. It serves two purposes: it stops the beneficiary from pledging or assigning their future distributions, and it blocks most creditors from seizing those distributions before they reach the beneficiary's hands.
A spendthrift provision is valid only if it restrains either voluntary or involuntary transfer of a beneficiary's interest.
A.R.S. § 14-10502(A)Arizona does not require elaborate language to create this protection. A trust term stating that the beneficiary's interest is "held subject to a spendthrift trust," or similar wording, is enough to restrain both voluntary and involuntary transfers. The law favors simplicity here.
How the Protection Works in Practice
Once a valid spendthrift provision is in place, a beneficiary cannot transfer their interest in the trust to someone else, whether by assignment, pledge, or other agreement. Creditors and assignees are also blocked from attaching, garnishing, or executing against trust assets before the trustee distributes them.
A beneficiary may not transfer an interest in a trust in violation of a valid spendthrift provision and, except as otherwise provided in this article, a creditor or assignee of the beneficiary may not attach, garnish, execute on or otherwise reach the interest or a distribution by the trustee before its receipt by the beneficiary.
A.R.S. § 14-10502(C)This protection ends once the trustee distributes funds to the beneficiary. After the money reaches the beneficiary's personal account, it becomes available to creditors like any other asset. The spendthrift provision shields the trust itself, not the beneficiary's personal finances.
