Can parents pass on their values through an incentive trust?

Although parents and children might enjoy a healthy political debate, using inheritance money to donate to opposing political causes might be pushing the limit. Are there estate-planning strategies by which parents can influence how heirs spend their inheritance?

As a law firm that has helped many parents to safeguard their children’s futures, we know that a variety of estate-planning devices can be used to pass along the testator’s or grantor’s values. 

The first step is to avoid making an outright, lump-sum distribution to heirs. With a trust, the trust documentation can define how and when disbursements should be made. Readers might be surprised at how flexible those instructions can be. For example, an incentive trust might authorize the trustee to pay a beneficiary only after some goal or accomplishment has been achieved, like graduating from college. The instructions may authorize disbursements at certain age benchmarks, or at specified monthly or yearly intervals. As long as the instructions don’t conflict with applicable state or federal laws, the trustee can be quite creative or detailed with the trust restrictions. 

To return to our example, a trust restriction that prohibits using distributions to make contributions to a certain political party might be subject to a constitutional challenge under the First Amendment. However, the ultimate goal might be accomplished another way, using tactics that don’t single out a specific political view. Specifically, a trust that permits payments only for certain types of expenses, such as college fees, mortgage or rent payments, insurance and/or healthcare, would most likely survive a comparable legal challenge. 

Source: Time, “How to Control How Heirs Spend Your Money,” Kerri Anne Renzulli, Aug. 27, 2015

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