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AACEP Hot Topics 3440 E. Russell Road ·
Las Vegas, NV 89120 · TEL: (702) 214-4389 Incentive Trust A relatively new concept is being used by a few estate planners throughout the U.S. to allow the Grantor to set out specific conditions that must be met prior to the beneficiaries receiving their inheritance. Incentive provisions are most often used as a part of a Dynasty Trust. A Dynasty Trust is an irrevocable trust set up to benefit heirs in perpetuity, while shielding the assets from creditors and generational estate taxes. The incentive trust contains provisions preset by the Grantor requiring that the beneficiary must meet certain conditions prior to receiving any distributions under the Trust. Traditionally, planners have most often used age of the beneficiary to set distribution dates. However, Grantors are receptive to trying to insert stipulations in their trusts to control or direct the beneficiaries' lives from the grave. Grantors are drafting their trusts to encourage higher education and personal values, such as marriage or employment. Also, they are inserting provisions to discourage behaviors such as substance abuse and gambling. Since incentive trusts are a fairly new concept, their long-term effectiveness is unknown. Also, the control asserted by these trusts have not been tested in the courts. Estate planners need to explore the use of these trusts in situations where you have a sophisticated Grantor, and he is concerned that his heirs may quickly dissipate his hard-earned fortune unless certain restrictive provisions are drafted into his trust document. Call Matt at AACEP, and he will direct you to some recent articles on this subject. |
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