The primary objective behind the use of either Intervivos Trusts or Testamentary Trusts in an Estate plan is to manage the transfer of wealth. Many people opt to transfer wealth using a trust because of the tax savings available from splitting income or because of the creditor-proof nature of a Trust. But there can be other more intriguing reasons to choose a trust.

For example, I have recently seen an increase in the use of what are often referred to as Incentive Trusts.

A 2007 study by PNC Wealth management of 1123 high net wealth adults , revealed that 30% of the respondents will require that their heirs meet certain requirements in order to receive their inheritance. Also, 14% of the respondents had attached terms that restrict how their heirs can use their inheritance once it is received.

An Incentive Trust is used when a Settlor would like to influence or modify behaviour by either providing or withholding gifts from a Trust. The most common forms of Incentive Trusts that I have seen involve age, education, employment and/or philanthropic conditions. For example, only if and when a beneficiary of a Trust completes an educational requirement will they receive a distribution of assets from a Trust.

Thanks for reading,
Paul Fensom