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 New Jersey, 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. New Jersey law recognizes the validity of spendthrift provisions in trusts, which are designed to protect the trust's assets from the beneficiaries' creditors and from the beneficiaries themselves if they are not financially prudent. Under New Jersey statutes, specifically N.J.S.A. 3B:31-31, a spendthrift provision is enforceable to restrict voluntary and involuntary transfer of a beneficiary's interest. However, there are exceptions where spendthrift trusts may not offer protection against certain types of creditors, such as those with claims for child support, alimony, or services provided to protect a beneficiary's interest in the trust. It's important to note that while spendthrift trusts can offer significant asset protection, they must be properly structured and operated in accordance with New Jersey law to ensure their effectiveness.