What does a spendthrift clause do in Massachusetts?

A spendthrift provision is valid only if it restrains both voluntary and involuntary transfer of a beneficiary's interest, and a term holding the interest subject to a "spendthrift trust", or words of similar import, is enough (G.L. c. 203E, § 502(a), (b)); a beneficiary may not transfer the interest in violation of it and, except as article 5 provides, a creditor or assignee may not reach the interest or a distribution before the beneficiary receives it (§ 502(c)). A mandatory distribution not made within a reasonable time after its designated date can be reached whether or not a spendthrift provision applies (§ 506(b)), and the 2012 act that enacted the code does not apply the both-ways requirement to spendthrift provisions in a trust created under an instrument executed before July 8, 2012. Whether a particular claim reaches a spendthrift interest is a question for a licensed Massachusetts attorney of your choosing.

Which assets does Massachusetts exempt from creditors?

Among them, an estate of homestead in a home occupied or intended to be occupied as a principal residence — the declared exemption of $1,000,000 by a recorded written declaration (G.L. c. 188, §§ 1, 3) or, without one, the automatic exemption of $125,000 (§ 4) — exempt from attachment, execution and sale for debts except the six kinds of claims § 3(b) lists; rights in retirement plans and individual retirement accounts, except for divorce, separate-maintenance or child-support orders and a criminal penalty or restitution order, and except an individual plan's deposits in the five years before bankruptcy or judgment above 7 percent of income (G.L. c. 235, § 34A); and life insurance proceeds, which the lawful beneficiary takes against the creditors of the person who effected the policy, subject to the recovery of premiums paid in fraud of creditors (G.L. c. 175, § 125).

Does a revocable trust shield assets from the settlor's creditors?

No. During the settlor's lifetime the property of a revocable trust is subject to the settlor's creditors (G.L. c. 203E, § 505(a)(1)), and after the death a trust that was revocable at the death is subject to the settlor's creditors, the funeral expenses and the statutory allowances to the extent the probate estate is inadequate (§ 505(a)(3)); a creditor of the settlor of an irrevocable trust may reach the maximum amount that can be distributed to or for the settlor's benefit (§ 505(a)(2)). A transfer made with actual intent to hinder, delay or defraud a creditor, or without reasonably equivalent value in the circumstances the statute lists, is fraudulent as to the creditor (G.L. c. 109A, §§ 5, 6).

Massachusetts Asset Protection: The Basics

Asset protection turns on your specific facts. A free role check shows you where you stand — and these questions belong with a Massachusetts attorney.

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What asset protection means — and what it doesn't

Asset protection is lawful planning, done in advance, to reduce exposure to future creditors. It is not a way to hide assets, defeat existing claims, or guarantee a result. Whether any protection applies depends on facts, timing, titling, the type of claim, and Massachusetts and federal law — which is why it's an attorney's call, not a do-it-yourself project.

Massachusetts features people ask about

Homestead

An estate of homestead exempts a home its owners occupy or intend to occupy as a principal residence from attachment, execution and sale for most debts — up to $125,000 automatically (G.L. c. 188, § 4) or up to $1,000,000 by a recorded declaration (§§ 3, 5), the amounts § 1 defines — except for taxes, earlier recorded liens, mortgages, support orders and the other exceptions § 3(b) lists; for a home held in trust, only the trustee executes the declaration (§ 5(a)(4)). Whether it applies to your situation is a question for an attorney.

A spendthrift trust someone else creates

A spendthrift provision is valid only if it restrains both voluntary and involuntary transfer, and a creditor or assignee of the beneficiary then cannot reach the interest or a distribution before the beneficiary receives it, except as the statute provides (G.L. c. 203E, § 502) — a mandatory distribution not made within a reasonable time after its date can be reached (§ 506). A trust you create for yourself is different: a revocable trust's property is subject to your creditors during your life, an irrevocable trust's to the most that can be distributed to you, and after your death a trust revocable at your death answers for your creditors to the extent your probate estate is inadequate (§ 505).

Exempt assets (life insurance, retirement)

Massachusetts law exempts from insolvency law, attachment and execution a person's interest in retirement plans, individual retirement accounts and annuities distributed from or purchased with them, except for divorce, separate-maintenance and child-support orders and criminal penalties or restitution, with a limit on an individual plan's recent deposits (G.L. c. 235, § 34A); and it entitles the beneficiary of a life insurance policy, other than the person who took it out, to the proceeds against that person's creditors and representatives, apart from premiums paid in fraud of creditors (G.L. c. 175, § 125) — subject to conditions and exceptions. Treat these as “may have special rules — confirm with an attorney,” never as a guarantee.

A revocable living Trust is not asset protection

Because you keep full control of a revocable living Trust, its assets are generally still reachable by your creditors during your life. A revocable Trust is an administration and probate-avoidance tool. Strategies that may offer protection are different, fact-specific, and an attorney's domain.

The timing trap: fraudulent transfers

Timing is everything. Moving, retitling, converting, or giving away assets after a creditor, lawsuit, divorce, bankruptcy, lien, collection, or tax issue has arisen can be treated as a fraudulent transfer under Massachusetts law (G.L. c. 109A, §§ 5, 6) — and can make things worse. Moving assets in the face of a claim is the kind of step trustees commonly bring to a licensed Massachusetts attorney first.

Where to start in Massachusetts

Asset protection is one of the most fact-specific areas of the law — the right approach depends entirely on your assets, your family, your risks, and timing. This page is general information only. A free role check can show you where you stand, and these decisions belong with a Massachusetts attorney.

Asset protection depends on facts, timing, documents, creditor claims, beneficiary circumstances, tax issues, and applicable law. TrusteeClear does not guarantee that any asset is protected, and nothing here is legal advice.

General information about Massachusetts law, not legal advice.

Frequently asked questions

What does a spendthrift clause do in Massachusetts?: A spendthrift provision is valid only if it restrains both voluntary and involuntary transfer of a beneficiary's interest, and a term holding the interest subject to a "spendthrift trust", or words of similar import, is enough (G.L. c. 203E, § 502(a), (b)); a beneficiary may not transfer the interest in violation of it and, except as article 5 provides, a creditor or assignee may not reach the interest or a distribution before the beneficiary receives it (§ 502(c)). A mandatory distribution not made within a reasonable time after its designated date can be reached whether or not a spendthrift provision applies (§ 506(b)), and the 2012 act that enacted the code does not apply the both-ways requirement to spendthrift provisions in a trust created under an instrument executed before July 8, 2012. Whether a particular claim reaches a spendthrift interest is a question for a licensed Massachusetts attorney of your choosing.
Which assets does Massachusetts exempt from creditors?: Among them, an estate of homestead in a home occupied or intended to be occupied as a principal residence — the declared exemption of $1,000,000 by a recorded written declaration (G.L. c. 188, §§ 1, 3) or, without one, the automatic exemption of $125,000 (§ 4) — exempt from attachment, execution and sale for debts except the six kinds of claims § 3(b) lists; rights in retirement plans and individual retirement accounts, except for divorce, separate-maintenance or child-support orders and a criminal penalty or restitution order, and except an individual plan's deposits in the five years before bankruptcy or judgment above 7 percent of income (G.L. c. 235, § 34A); and life insurance proceeds, which the lawful beneficiary takes against the creditors of the person who effected the policy, subject to the recovery of premiums paid in fraud of creditors (G.L. c. 175, § 125).
Does a revocable trust shield assets from the settlor's creditors?: No. During the settlor's lifetime the property of a revocable trust is subject to the settlor's creditors (G.L. c. 203E, § 505(a)(1)), and after the death a trust that was revocable at the death is subject to the settlor's creditors, the funeral expenses and the statutory allowances to the extent the probate estate is inadequate (§ 505(a)(3)); a creditor of the settlor of an irrevocable trust may reach the maximum amount that can be distributed to or for the settlor's benefit (§ 505(a)(2)). A transfer made with actual intent to hinder, delay or defraud a creditor, or without reasonably equivalent value in the circumstances the statute lists, is fraudulent as to the creditor (G.L. c. 109A, §§ 5, 6).

General information about Massachusetts law, not legal advice.