TELESEMINAR: Incentive Trusts in Estate Planning: Promise and Peril – A National Perspective
October 15, 2014
12:00 – 1:00 p.m.
1.00 MCLE hours
Incentive trusts are a mechanism by which the settlor tries to “incentivize” or control the behavior of beneficiaries. Settlors may want to encourage children or grandchildren to achieve certain educational milestones, maintain a job, get married or have children, or remain free of substance abuse or other risky behaviors. A beneficiary’s attainment of these behavioral benchmarks triggers certain distributions. In a sense, it is an estate planning mechanism for awarding settlor cash for good beneficiary behavior. But there are serious limits. There are the limits of what the law will allow a settlor to demand of a beneficiary or a trustee to enforce. There are also practical limits, including how to objectively judge a beneficiary’s behavior when making distributions. Incentive trusts are decidedly a mixed bag. This program will provide you with a real-world guide to drafting incentive trusts, counseling clients about their effectiveness and limits, and understanding what the law will (or won’t) allow.
- Uses and limitations – practical and legal – of incentive trusts
- Types of incentive trusts – and rates of success or failure in achieving settlor goals
- Increasing the enforceability of incentive trusts – and what’s not enforceable
- Structuring incentives so they can be objectively measured and administered by trustees
- Drafting distribution provisions
- Alternatives to incentive trusts, including “principle trusts”
- Counseling clients about downsides of incentive trusts
John A. Warnick, Purposeful Planning Institute, Colorado