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Incentive trusts can provide peace of mind

Many Nevada residents choose to incorporate trusts into their estate plans because they worry that some of their heirs could act irresponsibly if they were to unexpectedly inherit a significant amount of money. A large windfall could have catastrophic consequences if the recipient has addiction issues or is unduly influenced by manipulative or pernicious individuals, and people who have these concerns often choose to place their assets into an incentive trust.

When assets are placed into an incentive trust, the trustee is only authorized to release them when the beneficiaries have met certain conditions. Incentive trusts commonly only allow assets to be distributed when certain milestones have been achieved, such as graduating from college, marrying, having children, remaining out of trouble or staying off drugs for a specified period.

These estate planning tools can also be set up to reward altruistic behavior or to boost the income of heirs who eschew high-paying corporate jobs in order to pursue careers in the public sector. Incentive trusts may also contain punitive provisions that cut off or reduce distributions to heirs who get into trouble with the law or relapse into alcohol or drug addiction.

While incentive trusts offer settlors several benefits, they also have a number of drawbacks. The wording on these legal documents is usually specific and rigid, but this may tie the hands of trustees and prevent them from acting in a manner that the settlor would likely have wanted should an unforeseen situation develop. Attorneys with estate planning experience may suggest that incentive trusts be drafted in a way that makes the intentions of the testator clear while allowing trustees to use their judgment and discretion.

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