An Anti-alienation clause is a provision in the governing document for an arrangement such as a trust that specifies that the beneficial or equitable owner of the property held in that arrangement cannot transfer the interest to a third party. This rule is an exception to the general rule in property law that favors free alienability.
The exception is recognized to benefit minors, incompetents, and trust beneficiaries that may otherwise behave as a spendthrift would.
A
spendthrift trust
A spendthrift trust is a trust that is created for the benefit of a person (often unable to control his/her spending) that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit of th ...
is an example of an arrangement containing an anti-alienation provision. The governing document of such a trust provides that the trust corpus may not be reached by creditors while the property is held in the trust. Creditors aware of this legal restriction on alienation may choose not to lend to the spendthrift.
Applied to pensions
The
Employee Retirement Income Security Act
The Employee Retirement Income Security Act of 1974 (ERISA) (, codified in part at ) is a U.S. federal tax and labor law that establishes minimum standards for pension plans in private industry. It contains rules on the federal income tax e ...
and the
Internal Revenue Code provide that most
retirement
Retirement is the withdrawal from one's position or occupation or from one's active working life. A person may also semi-retire by reducing work hours or workload.
Many people choose to retire when they are elderly or incapable of doing their j ...
plans contain anti-alienation provisions related to the benefits held by these trusts. The anti-alienation provisions require these trusts to prohibit the alienation or assignment of pension benefits to anyone other than the affected participant in the plan, or his/her designated beneficiaries. See IRS Code §401(a)(13) and ERISA §206(d)(1).
Wills and trusts
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