State RegulationsOH specificDifficulty 3/5
A life policy's beneficiary designation includes a spendthrift clause, and the beneficiary owes significant debts. What does the spendthrift clause accomplish?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A spendthrift clause bars the beneficiary's creditors from attaching, garnishing, or anticipating the beneficiary's interest in the proceeds before payment, so the money reaches the beneficiary first and only then becomes exposed to ordinary creditor remedies (Ohio beneficiary framework, ORC 3911.09 and companion sections).
Why the other options are wrong
- B) Debt does not disqualify a beneficiary; the clause protects rather than forfeits the interest.
- C) The insurer's obligation runs to the beneficiary, not to third-party creditors.
- D) A spendthrift clause concerns creditor protection, not the settlement option chosen.
Memory hook
Spendthrift wall: creditors wait until the money lands.