Pros and Cons of Incentive Trusts and Attorney’s Role in Helping Clients Make Informed Decisions

Judy Barber (Consultant, Mediator, Publisher, Family Money Consultants LLC) has recently published her article entitled The Psychology of Conditional Giving; What’s the Motivation, Prob. & Prop., Nov./Dec. 2007, at 57.

Here is the conclusion to her article:

An attorney’s own sense of both the breadth and the limits of what feels appropriate to address is key to open discussion with clients. Guidance about what is comfortable to discuss will be apparent when the client answers the questions regarding concerns that the succeeding generation’s greater independence may create distance between generations. Elders may find difficulty in seeing the potential for change and disappointment and embarrassment that children do not reflect their values. The planner will need to provide guidance about what is comfortable to discuss.

An incentive trust is a psychologically complicated estate planning tool. Many [settlors] see the use of standards of behavior as a worthwhile plan to perpetuate what they believe is right. The attorney can help the client balance conflicting pulls and make fully informed choices. On the one hand, incentives have the potential to make future generations strong stewards of the client’s hard-earned wealth. On the other hand, incentives can polarize succeeding generations and create family strife. The estate planner and the client should discuss the full meaning of conditional giving and understand the range of possible consequences. Estate planners and clients, in the course of dialog, it is hoped, will become aware of the effects of their individual family histories and experiences, and the psychological implications will be incorporated into the ongoing debate about the pros and cons of incentive trusts.