Berman & Asbel, LLP

Incentive trusts to encourage heirs in life

Pennsylvania residents who do not want to leave their estate in the hands of a probate court might look into the option of creating a trust for management of important assets after they die. However, there could be some concerns about how money or other assets would be handled by some heirs, especially those who may have demonstrated poor skills in doing so in the past. Others might want to encourage their heirs to reach certain goals before receiving an inheritance. An incentive trust is an excellent option to consider in this case.

Incentive trusts allow for some creative conditions to be used in promoting certain actions by heirs. A grantor might require that an heir complete college studies or find gainful employment for a defined period of time before receiving funds. There might be provisions for funds to go to those heirs engaging in charitable work. An incentive trust might even be used to supplement the limited income of people who are devoting their life to low-income work that serves a noble purpose.

One of the drawbacks related to an incentive trust can be inflexibility. For example, a requirement of completing a goal might seem reasonable, but life events could interfere with an heir's good intentions. Adverse situations such as poor health or an injury could prevent someone from complying with the conditions stated for receiving an inheritance. Careful planning is crucial to ensure that the trustee has some leeway for overriding a condition that imposes unreasonable requirements.

Because the details in an incentive trust are so important, it is wise to have sound legal advice in creating this element of an estate plan. Additionally, an estate planning lawyer can schedule regular reviews of the documents to ensure that life changes are taken into account in a timely manner.

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