Incentive Trusts

“Incentive trusts.” It’s a term we hear from time to time in planning estates. What clients and advisors usually mean to describe is a trust that gives the beneficiary some incentives to behave, well, better. Like getting married or having children. Or giving up bad habits. Or finishing an education.

Are incentive trusts a good idea? And do they work?

Our lived experience suggests that the usefulness of the incentive trust is … mixed. Sometimes they provide an incentive. Often they make the trustee’s job difficult. How should the trustee judge the beneficiary’s compliance? Will the trust alienate the beneficiary? Is the incentive good enough to urge behavior changes? Did the settlor really intend to punish non-compliance?

In this podcast episode we discuss incentive trusts and our experience with them. Join us.