Elements of a Spendthrift Trust: In order for a trust to be spendthrift, a provision in the trust instrument must prevent the trust beneficiaries from 1) transferring their interest in the trust (voluntary alienation) and 2) must prohibit trust beneficiaries' creditors from reaching the trust assets (involuntary alienation). Which statement best describes this requirement?

• A. A provision allowing free transfer of interest.
• B. A clause requiring beneficiaries to loan assets.
• C. A provision preventing voluntary alienation and prohibiting creditors from reaching assets.
• D. A provision ignoring creditors.

Answer: (C)

Spendthrift protections hinge on a trust clause that blocks the beneficiary from freely transferring their interest and keeps the trust assets out of the reach of the beneficiary’s creditors. The statement that best describes this requirement is a provision that prevents voluntary alienation and prohibits creditors from reaching the assets. If a trust allowed free transfer of the beneficiary’s interest, it would lose spendthrift status because the beneficiary could alienate the interest. A clause that obliges the beneficiary to loan assets isn’t how spendthrift protections work, and a provision that ignores creditors provides no shield at all.