How “Spendthrift Provision” is Defined - Commentary to Florida Trust Code

Legal Commentary on the Definition of “Spendthrift Provision”

Fla. Stat. § 736.0103(22) defines the term “spendthrift provision.” The text of the subsection reads:

“Spendthrift provision” means a term of a trust that restrains both voluntary and involuntary transfer of a beneficiary’s interest.

A spendthrift provision restricts the ability of a trust beneficiary to transfer that beneficiary’s interest in a trust. The phrase “voluntary and involuntary” is key to understanding how a spendthrift clause works.

The restraint on voluntary transfers stops a beneficiary from choosing to assign her interest in the trust to a different party. For example, assume that Brian is the beneficiary of a trust which provides $100 to him every week in cash. The trust has a valid spendthrift provision. Brian has no ability to assign future payments of the $100 to a third party, even if that third party wished to pay for that assignment. Thus, if Brian heard a radio ad about immediate cash for structured settlements or annuities (877 cash now!), he would find that he did not qualify for such a transaction. The spendthrift clause would make any such assignment null and void. However, Brian may spend his $100 each week in whatever manner he wishes; he simply has to wait until he receives the payment.

The restraint on involuntary transfers stops the creditors of a beneficiary from accessing the beneficiary’s trust interest in the exact same way that it stops a beneficiary from voluntarily transferring the interest. In our example above, Brian had no ability to transfer or assign his future distributions, but he had full access to past distributions. The same is true regarding Brian’s creditors. Creditors may potentially reach assets already distributed to a beneficiary in the past, but a spendthrift provision will stop creditors from attaching a lien to future distributions. However, there are some limited exceptions found in Fla. Stat. § 736.0503 which allow some creditors to access trust interests despite a spendthrift provision.

The primary statute section regarding trust spendthrift provisions is Fla. Stat. § 736.0502.

History of the Definition of “Spendthrift Provision”

The term “spendthrift provision” has been consistently defined since the Florida Trust Code took effect in 2007. However, the placement of the definition within § 736.0103 has changed multiple times.

This article is part of the PTM Legal Commentary to the Florida Trust Code. Click here to navigate through the entire commentary.