Are there downsides to an incentive trust?

Are there downsides to an incentive trust?

| Aug 26, 2020 | Estate Planning

To some degree, you think that an incentive trust sounds like a great idea. You’re going to leave your wealth to your heirs anyway. Why not put it in a trust that gives them some goals, like advancing their career or getting a college education? It seems like a win/win. But are there any downsides?

The truth is that there certainly can be downsides. For one thing, if that trust is going to be your legacy to your children, are they going to resent you for it? They may feel like you’re endlessly trying to mettle in their lives and force them to live the way you think is best, even if they do not think it is best. That can create long-term resentment

Another potential downside is if circumstances change. Maybe your heir starts a successful business without going to college. They don’t want to spend four years getting a degree for a career they’re already doing. Does that mean they do not get the money in the trust? If it says that they have to go to college to get it, that could be exactly what happens. Is that actually what you wanted when you set it up? 

The way that an attorney can help you is simple: They can walk you through these options and think about the big picture. You need to understand the legal side of setting up a trust, but you also need to think about the practical side. Working with someone who has done this before and who knows how to consider it carefully gives you an edge and helps you do your estate planning properly. 

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