Can a Trust Keep My Daughter's Inheritance Away From Her Creditors?

Elaine's Question

Elaine is 75, lives in Jupiter, and has spent the last several months worrying about something most parents never expect to think about at her age: what happens to her daughter's inheritance if it lands in the middle of a bankruptcy. Kim, her daughter, is by every account a wonderful person. She is also, by Elaine's own description, someone who has never quite gotten ahead of her bills, and her ex-husband has continued pursuing her for money years after their divorce. Elaine's estate plan currently leaves a meaningful sum to Kim outright. She wants to know whether an irrevocable trust can change that outcome. (Elaine is a composite drawn from patterns I see often in my practice, not an actual client.)

An irrevocable trust is simply a trust the person who creates it cannot unilaterally revoke or amend once it is signed. That loss of control is exactly what allows the assets inside it to be treated as separate from the beneficiary's own estate for creditor and bankruptcy purposes. That is the tool Elaine is considering, and it is worth walking through carefully.

What a Spendthrift Provision Actually Does

Under Florida's Trust Code, a spendthrift provision is a clause in the trust document that restrains both the beneficiary's ability to voluntarily transfer or sell their interest, and a creditor's ability to involuntarily seize it. Florida Statutes section 736.0502 recognizes this kind of provision, and Florida courts require that it restrict both types of transfer, voluntary and involuntary, to count as valid. A clause that only blocks one side does not do the job.

The protection has a clear boundary. A spendthrift provision protects the beneficiary's interest only while the assets remain inside the trust. The moment the trustee actually distributes cash or property directly to Kim, that money becomes hers, and it becomes reachable by whoever is trying to collect from her, whether that is a bankruptcy trustee or her ex-husband's attorney. This is why the design of the distribution provisions matters just as much as the spendthrift clause itself.

Discretionary Distributions: The Second Layer of Protection

This is where Elaine's trust does its real work. Florida law distinguishes between a mandatory distribution, where the trust says the trustee must pay out a set amount at a set time, and a discretionary distribution, where the trustee decides whether, when, and how much to distribute based on standards Elaine writes into the trust.

Under section 736.0504, if the trustee has genuine discretion, a creditor generally cannot force a distribution just because Kim owes them money. The creditor cannot step into Kim's shoes and demand that the trustee hand over funds. Combined with a spendthrift clause, discretionary distribution authority is the strongest form of creditor protection available under Florida trust law, because it blocks not only ordinary creditors but, in many situations, even some of the exception creditors described below.

There is one important caveat. If a trust calls for a mandatory distribution on a specific date and the trustee simply sits on it past a reasonable time, a creditor may be able to reach that overdue distribution under section 736.0506, spendthrift language or not. This is one more reason the trustee's role, and the trust's drafting, matter so much.

The Exceptions: What a Spendthrift Clause Cannot Block

Spendthrift protection is strong, but it is not absolute. Florida Statutes section 736.0503 carves out three categories of creditors who can reach a beneficiary's trust interest despite a valid spendthrift provision:

• A spouse, former spouse, or child of the beneficiary holding a court order or judgment for child support or spousal support (alimony).
• A creditor who provided services that protected the beneficiary's interest in the trust itself, such as an attorney who helped the beneficiary defend their trust rights.
• A claim by the State of Florida or the federal government, to the extent state or federal law specifically allows it.

This is directly relevant to Kim's situation. If her ex-husband has an actual court order for alimony or child support, a spendthrift clause will generally not stop him from reaching trust income or assets to satisfy that obligation. Florida has a strong public policy favoring enforcement of support orders, and that policy outweighs the trust's protective language. But an ordinary debt collection judgment, a credit card balance, or a bankruptcy claim unrelated to support is a different story, and that is exactly the kind of claim the spendthrift and discretionary provisions are built to stop.

Why an Outright Inheritance Would Have Been a Problem for Kim

Had Elaine simply left Kim's share outright, in Kim's own name with no trust at all, the money would have become part of Kim's personal assets the moment it was received. In a bankruptcy filing, that inheritance would typically become property of the bankruptcy estate, available to satisfy Kim's creditors. In the context of her ex-husband's ongoing collection efforts, an outright inheritance would simply be one more asset he could pursue.

This is the practical difference an irrevocable trust makes. It is not about hiding money or defeating legitimate support obligations. It is about controlling the form in which Kim receives help, so that a wonderful daughter with a difficult financial history can still benefit from her mother's planning without that benefit evaporating into someone else's hands.

One more point worth flagging for families in Elaine's position: Florida does not have a domestic asset protection trust statute. If Elaine tried to protect her own assets from her own creditors by putting them in a trust for herself, that would not work, a self-settled trust generally does not shield the settlor from the settlor's own creditors. This entire discussion is about protecting a beneficiary's inherited interest, not the settlor's own assets.

The Trustee's Role Is the Whole Ballgame

None of this protection functions without a trustee who actually exercises independent judgment. If Kim were named as her own sole trustee with full access to principal, courts and creditors could argue that she effectively controls the assets, undermining the protection Elaine intended. This is why Elaine's plan uses an independent trustee, someone with no personal stake in shielding Kim from her own creditors, who applies the distribution standards in the trust document honestly and consistently.

An independent trustee can also adjust the pace and form of distributions if Kim's financial circumstances change, paying certain expenses directly (housing, medical care, tuition) rather than handing over cash that could be immediately garnished. This flexibility is often more valuable to families like Elaine's than any single clause in the document.

Sources

• The Florida Senate, Florida Statutes Chapter 736, Part V: Creditors' Claims; Spendthrift and Discretionary Trusts (2023)
• FindLaw, Florida Statutes Title XLII. Estates and Trusts Section 736.0502 (last updated January 1, 2025)
• Alper Law, Spendthrift Trusts in Florida: How Spendthrift Provisions Protect Beneficiaries (April 17, 2026)
• Alper Law, Florida Asset Protection Trust: Why DAPTs Fail for Florida Residents and What Works Instead
• Barnes Walker, Spendthrift Trust in Florida: Protect Inheritances from Creditors and Misuse (April 18, 2026)
• Katz, Baskies & Associates, Examining Spendthrift Trusts and Discretionary Trusts in Florida (September 2021)

This article is for general informational purposes only and does not constitute legal advice, nor does reading it create an attorney-client relationship. Florida estate, elder, probate, and real estate law are fact-specific and change over time. Consult a licensed Florida attorney about your individual circumstances. Arthur Simpson, Esq. is licensed to practice law in the State of Florida. Attorney advertising.