Some Difficulties With Incentive Trusts

For many clients incentive trusts may offer a way to influence a beneficiaries’ behavior from beyond the grave.  The idea behind an incentive trust is to reward a beneficiary for making good decisions that might include going to college or avoiding drugs and alcoholism.  This article discusses some of the difficulties that might come up with incentive trusts. 

One major issue that a client might face is deciding how specific they want an incentive trust to be.  In order for an incentive trust to be effective the client needs to make it specific enough to carry out his or her intent.  A big problem with making the trust too specific though is the possibility that the beneficiary might face an unforeseen circumstance that makes it impossible for them to comply with the trust’s terms.  Another issue concerns the moral or philosophical implications of trying to control a person’s behavior from beyond the grave. 

See David H. Lenok, The Dangerous Allure Of Incentive Trusts, Wealth Management, September 9, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.