The typical enforceable trust spendthrift provision forecloses assignment and attachment of the equitable property interests that are incident to the particular trust relationship. Assume an income-only non-self-settled irrevocable trust for X’s life that ultimately terminates in favor of Y. Y would be foreclosed from assigning his equitable quasi-remainder during X’s lifetime. Once the trust has terminated and legal title to its corpus has passed from the trustee to Y free of trust, then the fee becomes fully assignable by Y and reachable by Y’s creditors, absent special facts. (A “currently distributable” item of income or principal in the hands of the trustee may be creditor-vulnerable as well.) One Illinois court has garbled its explanation of all this core doctrine. “Spendthrift trust provisions,” asserts the court, “restrict the beneficiary’s ability to alienate and the beneficiary’s creditors’ ability to attach the trust corpus.” See In re Marriage of Sharp, 860 N.E.2d 539 (Ill. App. 2006). But the right of alienation of the corpus itself is in the title-holding trustee while the trust is ongoing, not in the beneficiary. It is a right that is generally untrammeled until title ultimately passes. Thus, a trust spendthrift clause is not the type of restraint on the alienability of property that has traditionally been unenforceable on public policy grounds. All this spendthrift doctrine is fleshed out in §5.3.3.3(c) of Loring and Rounds: A Trustee’s Handbook [pages 364-377 of the 2018 Edition], which sub-section is reproduced in the Annex below.
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