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    Estate & Probate » Blog » Three Things to Know About Oklahoma Spendthrift Trusts

    Three Things to Know About Oklahoma Spendthrift Trusts

    A spendthrift trust refers to a type of trust that lets beneficiaries inherit money without the ability to decide how the money is spent. These trusts are particularly helpful when an heir lacks the responsibility necessary to manage assets. Instead, these trusts grant the authority to determine how assets are spent to an independent trustee, who makes all decisions about how funds should be used for a recipient’s benefit. Because spendthrift trusts play an important but complex role, this article reviews three things to understand about the way in which these trusts operate.

    How Spendthrift Trusts Work

    These trusts prohibit beneficiaries from borrowing or spending against trust funds. The trusts are also created to prevent creditors from seizing any assets in the trust to pay debts owed by the beneficiary. To be effective, a spendthrift trust must contain precise language. Oklahoma as well as many other states recognize spendthrift trusts. 

    The Reasons Why People Create Spendthrift Trusts

    There are several reasons why people create spendthrift trusts, but some of the most common advantages include:

    • Creating a trust is a powerful way to make sure that your beneficiaries receive adequate care and protection even if you do not agree with their spending habits.
    • Many times, wealthy people are concerned that younger beneficiaries are not wise or responsible enough with large amounts of money. By utilizing the proper language, a person can stipulate specific ages when beneficiaries can have access to either all or part of assets.
    • People often find comfort in knowing that creditors will never have access to assets located in the trust because the trust will never be directly in the beneficiary’s control.
    • With spendthrift trusts, a person has substantial control over what happens to their estate when they pass away. This assumes, however, that a person establishes a spendthrift trust properly.

    Limitations to Protection Provided by Spendthrift Trusts

    Unfortunately, spendthrift trusts have some limitations. Oklahoma § 60-175.25 contains the following limitations on spendthrift trusts:

    • Any tool creating a trust must utilize specific words that the interest of any beneficiary to the income of a trust is not subject to either voluntary or involuntary alienation by the beneficiary. 
    • Any assets placed in the trust are subject to enforceable claims under Oklahoma law for support of a spouse or a child of the beneficiary, necessary services rendered or necessary supplies provided to the beneficiary or any judgments based on any such claim.
    • Any assets in the trust exceeding $25,000 are subject to garnishment by creditors.

    In short, Oklahoma law allows for spendthrift trusts but limits the protections that the trusts provide by allowing debts to be paid that are related to the beneficiary’s child, spousal support, or necessities like food and water. 

    Speak With an Experienced Estate Planning Lawyer

    If you have additional questions about spendthrift trusts or any other type of estate planning tool, you should not hesitate to speak with an experienced attorney. Contact attorney Jim A Lyon today to schedule a free case evaluation.

    Ethan Moran
    Ethan Moran
    09:36 28 Dec 22
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    Philippe Joshua
    17:56 30 Nov 22
    Jim's firm was referred to me by a friend who knew I was looking for an estate planning lawyer. I can't say enough good stuff about him. He's genuine, thorough and highly skilled. Strongly recommend.
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    Estate & Probate » Blog » Three Things to Know About Oklahoma Spendthrift Trusts