Controlling from the Grave: Incentive Trusts

November 5, 2018
Controlling from grave

When you accumulate a significant amount of wealth, you may worry that your descendants may not know how to deal with such a sizable inheritance. If the amount is large enough that your heirs do not have to earn a living, you may worry that they will waste away their lives in a consistent vacation mode. You may also want the money to be preserved for future generations rather than spent lavishly.

An Incentive Trust is an estate planning tool where the trustee makes distributions to the beneficiaries based on pre-determined goals or conditions. Incentive trusts are structured to motivate certain types of behavior and discourage others. 

A trust can “reward” a beneficiary for obtaining a post-graduate degree, maintaining stable employment in a certain field, buying a home in specific location, or even remaining clean and sober for a specified period. Once the milestone is met, a distribution is made to the beneficiary.

Keep in mind this type of dangling a carrot may offend your family members. People tend to resist being controlled from the grave. You must also keep in mind that certain freedoms cannot be restricted. If a restriction is challenged as violating public policy, it may be overturned.

For more information on the pros and cons of using an Incentive Trust, contact Stouffer Legal at 443-470-3599 in the Greater Baltimore area.

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