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 North Carolina, a spendthrift trust is a legal tool that allows a grantor to place assets in a trust with specific provisions that prevent the beneficiary from squandering the trust's assets. These provisions restrict the beneficiary's ability to assign their interest in the trust to others, whether voluntarily or as collateral for a debt. Additionally, spendthrift provisions protect the trust's assets from being accessed by the beneficiary's creditors. North Carolina General Statutes (N.C.G.S.) § 36C-5-501 to 36C-5-507 outline the enforceability of spendthrift provisions, stating that a creditor of the beneficiary generally cannot reach the interest of the beneficiary or compel a distribution from the trust. However, there are exceptions where certain types of creditors may have claims against the trust, such as claims for child support or alimony. It's important to note that while spendthrift trusts offer protection for the assets from the beneficiary's creditors, they must be properly structured to comply with state law and to ensure their effectiveness.