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How an incentive trust works

Nevada residents who are creating an estate plan and who have heirs that they feel are irresponsible might worry about leaving them money or other assets that they will waste. An incentive trust may be one way to address these concerns.

An incentive trust is a trust that puts certain conditions on when distributions are made to beneficiaries. For example, it might tie the distributions to a certain milestone such as holding down a job, finishing college, marrying or having children. An incentive trust should be flexible enough to allow for unforeseen circumstances. For example, if the distributions from the trust are tied to full-time employment but the beneficiary becomes unable to work due to a disability, he or she might be unable to access the inheritance.

In addition to making sure that the trust is worded to avoid this, it is also important to choose the right trustee. The trust can give the trustee some discretion in how to distribute the assets based on the intent of the trust settlor. This means choosing a trustee who also deals with conflict well and will not be pushed around by the beneficiary.

An attorney may help a person with a number of other aspects of estate planning besides an incentive trust. This may range from different types of trusts, such as a special needs trust or a charitable trust, to documents such as a power of attorney to appoint people to take care of financial matters and health care decisions if the principal becomes incapacitated.

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