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An Update on Third-Party Discretionary Trusts With Spendthrift Provisions

Al W. King III discusses the recent trend by the courts to disregard a spendthrift clause of third-party trusts when exception creditors are involved.

The trust spendthrift clause has been an important line of defense providing asset protection for third-party discretionary irrevocable trusts. Generally, the spendthrift clause prevents the attachment or assignment of a beneficiary’s interest in an irrevocable trust before the interest is distributed. As such, the spendthrift clause typically protects against creditors of the beneficiaries, involving cases of divorce, financial troubles or substance abuse. Despite this, it’s important to

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