YOU ASK:

What is the definition of Spendthrift Trust Clause?

WE ANSWER:

Spendthrift Trust Clause is a provision in a life insurance policy that pays directly to the beneficiary and does not allow the creditors of the beneficiaries to receive the payouts. Thus, if a beneficiary pledges the proceeds expected from an insurance policy to his creditors, claims for benefit payments from the creditors will not be honored.

This prevents a beneficiary that is unable to control spending or who is talked into a speculative investment to use expected proceeds as collateral or to use a potential gift as security for credit.

The spendthrift trust clause may also be attached to annuities and trusts.

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