Wiener and Wiener LLP
With Offices In Allentown And West Palm Beach, We Serve Throughout Eastern Pennsylvania And Florida

Are incentive trusts a good option for estate planning?

| May 28, 2021 | Estate Planning |

When you are doing your estate planning, one possible option you may consider for your beneficiaries is a specific type of trust. Incentive trusts are both motivational and conditional because the trust grantor (you) creates the terms and milestones the beneficiaries must meet in order to receive disbursements of funds.

These types of trusts frequently are used by the wealthy scions of families to assure their descendants do not lead dissolute lives, which sometimes occurs with the “idle rich.” However, you don’t have to be a Rockefeller for your family to benefit from an incentive trust.

What’s the role of the trustee?

Trust grantors should give quite a bit of thought to whom they appoint as the trustee of an incentive trust. Not only does the trustee manage the trust assets, but they also sometimes have to use their discretion when determining whether the terms of the trust have been met.

What are the terms of an incentive trust?

That’s up to you as the trust grantor. Perhaps you want to ensure that all your grandchildren obtain a college degree in order to access their trust funds or that your beneficiaries must be gainfully employed in order to receive disbursements. You might also stagger disbursements with life events, e.g., marriage, the birth of children, etc.

What are the potential problems with incentive trusts?

Because we can’t see into the future, there is no way of knowing what obstacles could prevent your beneficiaries from meeting their goals. A grandchild could be badly injured in an accident and never able to graduate from college as a consequence. Another might never marry or be able to bear or sire children. 

Your estate planning attorney can work with you to draft an incentive trust with enough flexibility for the trust to accommodate scenarios like these and still be fair to your beneficiaries.