Legal Definitions - self-destruct clause

A self-destruct clause is a provision in a trust that automatically terminates the trust under certain conditions. This clause is commonly found in discretionary trusts, particularly in supplemental-needs trusts.

For instance, a trust established to provide for the needs of a disabled person may include a self-destruct provision that terminates the trust if the beneficiary becomes ineligible for government-benefits programs like Medicaid. This means that if the beneficiary no longer qualifies for Medicaid, the trust will be dissolved, and the remaining assets will be distributed to the beneficiaries.

Another example of a self-destruct clause is a trust that terminates when the beneficiary reaches a certain age or achieves a specific goal, such as graduating from college or getting married.

These examples illustrate how a self-destruct clause can be used to ensure that the trust assets are used for their intended purpose and that the trust does not continue indefinitely. It also provides a way to distribute the remaining assets to the beneficiaries once the trust's purpose has been fulfilled or is no longer necessary.