Some Tennessee residents want to provide for their loved ones, but also want to see them succeed in life on their own. One way to do this could be through an incentive trust. Using this option could help a particular loved one in more ways than one.
It would be easy just to give an heir or beneficiary a bunch of money and call it good, but many people do not want that person relying on it and not making something of him or herself. In an incentive trust, a Tennessee resident can put conditions on a beneficiary receiving distributions from the trust. For example, a beneficiary may not receive distributions from a trust until he or she receives a college degree. Another beneficiary may not receive distributions until he or she completes a drug or alcohol rehabilitation program and remains sober for a certain amount of time.
While these types of conditions encourage positive behaviors and changes in beneficiaries, an individual needs to be careful not to include a condition that would be contrary to the law. In addition, the trustee needs some discretion when it comes to the stipulations for distribution. For example, if a beneficiary becomes disabled and cannot fulfill the requirements of the trust, the trustee should have the discretion to allow distributions anyway in order to help the beneficiary.
Understanding how to properly create an incentive trust could prove problematic. It is not as simple as people may believe. Individuals wanting to use such a trust would greatly benefit from working with an estate-planning attorney in order to avoid challenges to the trust in the courts.