A spendthrift trust is a trust in which the person who makes the trust and places property or assets in it (the grantor, settlor, or trustor) includes a provision that prohibits the beneficiary’s interest in the trust from being assigned to another person or entity—whether as a gift or as collateral for a loan or debt—and prevents a creditor from reaching or attaching the beneficiary’s interest in the trust.

A spendthrift is a person who spends money wastefully or foolishly and a spendthrift provision in a trust (a spendthrift trust) is designed to preserve the trust’s assets and protect the beneficiary from the beneficiary’s spendthrift ways.

In Colorado, a spendthrift trust is a legal tool that allows a grantor to place restrictions on how the trust's assets can be used by the beneficiary, specifically to prevent wasteful or imprudent spending. Colorado law recognizes the validity of spendthrift provisions in trusts, as outlined in the Colorado Trust Code. These provisions prevent the beneficiary's creditors from reaching the trust assets to satisfy the beneficiary's debts, with certain exceptions such as claims for child support, alimony, or necessary services rendered to the beneficiary or the beneficiary's family. The spendthrift trust is designed to protect the assets within the trust from being squandered by the beneficiary and from the claims of creditors, ensuring that the trust serves its purpose over time. However, it's important to note that spendthrift trusts must be carefully drafted to comply with state law and to effectively protect the trust assets as intended.