Estate planning is not always a simple and straightforward matter. If you have someone on your inheritance list that is not ready to handle a large amount of money, you would rightfully have concerns.
Under these circumstances, it is possible to maintain a significant degree of “dead hand control” through the utilization of an incentive trust.
You can use an incentive trust to guide a beneficiary toward choices that you would like to see them make. The first step is to fund the trust and name a trustee to act as the trust administrator. It can be someone that you know personally, but it is also possible to use a professional fiduciary.
Banks and trust companies provide trustee services, and some attorneys, financial advisors, and accountants can be engaged to act as trust administrators. Because of the nature of an incentive trust, you would definitely want to choose a trustee that has no personal interests.
To explain by way of example, let’s say that you have a young person on your inheritance list that has not started college. You could make this individual the beneficiary of an incentive trust and leave distributions instructions for the trustee in the trust declaration.
Under these hypothetical circumstances, you could allow for the payment of tuition and other expenses while the student remains in school. Perhaps you could allow a lump sum distribution after graduation, along with a dollar for dollar match of on-the-job earnings.
This is just one example, and you can also use an incentive trust to guide people away from destructive behavior. Someone that has a substance abuse problem could be required to undergo treatment and provide proof of staying clean on an incremental basis.
The terms of an incentive trust are entirely up to you as long as you are not requiring the beneficiary to do something that is illegal.
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