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Using a trust to incent favorable behavior

Growing up can be difficult and most children go through a rebellious period, particularly during their teenage years. It is during these formative years that parents aim to instill values in their children that will ultimately enable a child to make better choices and right a wayward path.

Many New York residents have likely heard the phrase trust find baby. Often referred to those young individuals who inherit large sums of wealth due to a relative's passing, trust fund beneficiaries have a reputation for often getting into trouble and lacking ambition. For parents who are concerned their son or daughter could potentially get into trouble if he or she suddenly inherited a large sum of wealth, a trust can be used to incent more favorable behavior.

Commonly referred to as an incentive trust, such an estate planning tool allows parents to set up certain conditions which must be met prior to a child receiving distributions from the trust. One married couple recently decided to set up an incentive trust amid concerns about their teenage son's behavior. The possibility that, upon their death, their son, who had struggled with addiction and behavioral problems, could potentially inherit millions scared the couple.

To prevent such a scenario from playing out, the couple's estate planning attorney recommended establishing an incentive trust. Should the couple pass, distributions from the trust would only be paid out if and when certain requirements were fulfilled. For example, each child would receive a certain amount upon graduating from college. Additional distributions would also be paid out for completing a certain number of annual community service hours.

An incentive trust is an attractive option for parents who may have concerns about a child's behavioral or substance abuse problems. New York residents who have questions about trusts and other estate planning matters would be wise to discuss their questions and concerns with an estate planning attorney.

Source: 


The Wall Street Journal, "Taming a Rebellious Teen With an Incentive Trust," Alex Coppola, Dec. 12, 2013

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