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What are incentive trusts, and do you need one?

On Behalf of | Dec 12, 2022

Incentive trusts are a trust with conditions. You can use them to incentivize a potential beneficiary to act in a certain way.

You can set out particular rules when you create the trust. Then, once you die, it falls to the person managing the trust to check if the beneficiary complies and is entitled to receive the assets you put aside for them.

What sort of conditions could you set?

It’s up to you. People commonly say things like:

  • You need to finish university
  • You need to get a certain grade
  • You need to earn a certain salary
  • You need to be clean of drugs for five years


At face value, all those things sound reasonable. The promise of money might give someone the extra push they need to achieve those targets.

However, you need to consider that they might not share your aspirations

Maybe they realize they chose the wrong course. Do you want them to stick with something they hate just for the money?

Or maybe they turn down other offers that could be better for them because they want to get the assets in the trust. Mightn’t they come to hold that against you?

You also need to consider that restricting when they can get the assets could prevent them from receiving the money when they most need it. For example, your grandchild needs expensive life-saving treatment. There’s enough money to cover it in the trust, but their parent (your child) can’t access it because they still have not met the conditions you set out.

Getting estate planning right can be challenging. Seek legal help to make the best decisions for you and your loved ones.