Question

If the trustor/donor includes a spendthrift clause in his/her revocable living trust to protect his/herself from creditors, it is effective:

a. to protect him/her from business creditors only and not his/her immediate family.
b. to protect only those assets originally deposited in the trust.
c. to protect only those assets acquired after funding the trust.
d. in no circumstances.

Answer 1

A spendthrift clause in a revocable living trust can protect the trustor from creditors under certain circumstances. The correct answer is C.

Step-by-step explanation:

A spendthrift clause in a revocable living trust is effective in protecting the trustor or donor from creditors under specific circumstances. The spendthrift clause prevents creditors from accessing the assets held within the trust to satisfy the trustor's debts and claims. However, the effectiveness of the spendthrift clause depends on the specific provisions stated in the trust agreement and the applicable state laws.

In general, a spendthrift clause protects the trustor from both business and personal creditors, including the trustor's immediate family. It shields the assets within the trust and restricts creditors' access to them. The clause is typically applicable to all assets that have been deposited or acquired after funding the trust, as long as they are properly included in the trust's provisions and are subject to the clause.