Christopher S. Mulvaney,

Attorney and Counselor-at-Law

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Gonzaga University School of Law – Spokane, Washington – Class of 2002 – Cum Laude The Latin phrase “Deo patriae, scientiis, artibus” translates to “For God and country through sciences and arts”.  The initials A.M.D.G. on the seal of Gonzaga Law School stand for Ad Majorem Dei Gloriam, which is Latin for “For the Greater Glory of God” the Motto of the Society of Jesus (Jesuits): a Catholic religious order founded by St. Ignatius of Loyola.

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Spendthrift clause in a Washington State Revocable Living Trust

A Spendthrift Clause, also known as a Spendthrift Provision, in a Washington State Revocable Living Trust is a crucial component designed to safeguard the assets within the Trust and promote the long-term financial security of the Beneficiaries. 

What it is: A spendthrift is a person who spends money extravagantly and wastefully. They are known for their careless and excessive spending habits, often leading to financial difficulties. The term is essentially the opposite of “thrifty,” which implies careful and economical use of resources. 

 

 

Potential for Trouble: The spendthrift’s lifestyle can lead to financial instability and even ruin if they don’t learn to manage their finances responsibly. 

Extravagant and Wasteful: Spendthrifts tend to spend money lavishly and without regard for the consequences. They may buy things they don’t need or overspend on things they do need. 

Irresponsible Spending: This carelessness often extends to not saving money, accumulating debt, or failing to plan for the future. 

Contrast with Frugal: The opposite of a spendthrift is someone who is frugal or thrifty, meaning they are careful with their money and avoid unnecessary spending. 

Essentially, a Spendthrift Clause limits a beneficiary’s access to and control over the Trust’s assets, and it generally protects those assets from the Beneficiary’s creditors. 

• Restricts Beneficiary’s control: The clause prevents a Beneficiary from selling, assigning, or pledging their interest in the Trust’s principal or income to secure credit or pay off debts.

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• Trust maintains ownership: The Trust itself remains the legal owner of the assets, and the Trustee manages and distributes them according to the terms set forth by the Grantor (the creator of the Trust).

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• Incremental distributions: The Successor Trustee, rather than the Beneficiary, determines when and how much money or assets are distributed to the Beneficiary, often through scheduled payouts or for specific purposes like education or healthcare.

• Protection from creditors: Since the assets are owned by the Trust and not directly by the Beneficiary, they are generally shielded from claims by the Beneficiary’s creditors, lawsuits, or Bankruptcy proceedings. 

Why it’s important

 

A Spendthrift Clause is particularly important in a Washington State Revocable Living Trust for several key reasons:

• Protecting beneficiaries from themselves: It helps protect Beneficiaries who might be financially irresponsible, susceptible to addiction, or vulnerable to poor financial decisions.

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• Ensuring long-term financial security: By controlling the distribution of assets, the clause helps ensure the inheritance provides a steady stream of support for the Beneficiary’s well-being over time, rather than being quickly depleted.

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• Safeguarding assets from creditors: It shields the inheritance from the Beneficiary’s creditors, lawsuits, and potentially divorce settlements, preventing the assets from being seized or squandered.

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• Promoting responsible financial management: The clause encourages financial discipline and responsible spending by limiting the Beneficiary’s direct access to and control over the funds. This is often done with an age restriction. Age 25 is the typical age after which Beneficiaries receive gifts free of Trust rather than managed for their benefit by a Successor Trustee if they are below age 25.

• Maintaining grantor’s wishes: It ensures the Grantor’s intentions for the distribution and use of their assets are honored rather than what the Grantor worked hard to acquire being given to a Beneficiary’s creditors.

• Avoiding Probate: All Revocable Living Trust’s in Washington State are Spendthrift Trusts by default, avoiding Probate and protecting Beneficiaries from losing their inheritance to creditors.

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In essence, a Spendthrift Clause offers a valuable layer of protection and control in a Washington State Revocable Living Trust, helping ensure that the Grantor’s legacy benefits their loved ones for years to come.

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Washington State residents can meet with me in Zoom/DocuSign from anywhere in the world, and I can notarize their electronic signatures because I am a remote online notary.  Just email me an image of your photo ID.