An incentive trust can give a client the ability to maintain some control over how trust assets are distributed after they die. The purpose of an incentive trust is to make sure that an heir uses their inheritance in a way that the donor intended. This column discusses some of the main pitfalls that donors need to watch out for when creating an incentive trust. There are many unplanned circumstances that might arise and if an incentive trust is too inflexible that might create problems for the heir down the road. On the other hand if the trust is too vague or open ended that could also become a problem. When creating an incentive trust it is a good idea to speak with an experienced estate planner to make sure that the trust will be able to fulfill the donors intent.
See Mark P. Cussen, Incentive Trust Pitfalls Advisors Should Know, Investopedia, December 11, 2015.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
