A goal of estate planning for many parents is to leave assets to adult children and other heirs. In some cases, however, parents may worry about the possible negative consequences of doing so. Consider these statistics: According to a recent report issued by U.S. Surgeon General Vivek H. Murthy, in 2015, more than 20 million Americans struggled with substance abuse disorders. In addition to addiction, the National Institute of Mental Health reports that tens of millions of Americans struggle with other mental health disorders that negatively and often severely impact their lives.
If you are the parent of a child who is currently struggling with or who has struggled with addiction or other serious mental health issues, you may have legitimate concerns about how an inheritance would be used and the potential negative effect a windfall could have on his or her life. Thankfully, parents who have these types of fears and concerns can take steps to both provide for and protect a son or daughter.
What Is An Incentive Trust?
Like any trust, parents who establish an incentive trust can fund and leave inheritance assets directly to a trust. Parents appoint a trustee to manage the trust assets and also any distributions of those assets. Incentive trusts differ from other types of trusts in that a parent, or whoever sets the trust up, can include provisions outlining certain restrictions or requirements that must be adhered to and followed to either discourage or encourage certain behaviors.
For example, a parent may include a provision whereby trust assets can only be distributed if a child successfully completes a drug or alcohol rehabilitation program and remains sober. Another example is that a child must obtain a college degree and hold down a full-time job in order to receive trust distributions.
Things to Keep In Mind if Considering an Incentive Trust
When establishing or changing any component of your estate plan, it is crucial to consult with an attorney who specializes in estate planning. This is especially important when it comes to establishing a trust since there is specific language that must be included, whether for an incentive trust or for a special needs trust. Additionally, an experienced attorney will work to ensure that the trust addresses your specific concerns and meets your intended goals for your child.