In American estate planning parlance, an incentive trust is a
trust
Trust often refers to:
* Trust (social science), confidence in or dependence on a person or quality
It may also refer to:
Business and law
* Trust law, a body of law under which one person holds property for the benefit of another
* Trust (bus ...
designed to encourage or discourage certain behaviors by using distributions of trust income or principal as an incentive. A typical incentive trust might encourage a beneficiary to complete a degree, enter a profession, or abstain from harmful conduct such as substance abuse. The beneficiary might be paid a certain amount of money from the trust upon graduating from college, or the trust might pay a dollar of income from the trust for every dollar the beneficiary earns.
Although incentive trusts have apparently become more common in the early 21st century, a 2007 survey found that less than one-third of wealthy Americans attach conditions to the distribution of their estate
According to Joshua Tate, an assistant professor at
Dedman School of Law, SMU Dedman School of Law, incentive trusts pose a problem of inflexibility: "because the settlor cannot foresee all potential eventualities or circumstances and take them into account in the trust, the terms of the trust can prove to be a burden for the beneficiaries
Eileen Gallo, a noted psychotherapist, has argued that, although incentive trusts may be effective in changing behavior, they may in fact be damaging to the beneficiaries, in that they rely on external motivation to encourage activities that should be
autotelic
An autotelic is someone or something that has a purpose in, and not apart from, itself.
Origin
The word "autotelic" derives from the Greek ''αὐτοτελής'' (''autotelēs''), formed from ''αὐτός'' (''autos'', "self") and ''τέλος ...
in natur
The seeming popularity of incentive trusts, however, is reflected in the many websites created by estate planners to market them.
References
* Robert Frank
The Wrong Way to Leave Money to Heirs The Wealth Report, ''Wall Street Journal Online'', May 15, 2007.
* Eileen Gallo
A Psychotherapist Looks at Incentive Trusts Journal of Financial Planning (Dec. 2004).
* Joshua C. Tate
Conditional Love: Incentive Trusts and the Inflexibility Problem 41 Real Prop., Prob. & Tr. J. 445 (2006).
* Wells, Marble & Hurst, PLLC
Incentive Trusts: An Idea Whose Time Has Come (and Gone?)
{{DEFAULTSORT:Incentive Trust
Wills and trusts
Common law
Inheritance