Are there downsides to an incentive trust?

 Posted on September 19, 2025 in Trusts

One of the biggest upsides to an incentive trust is that it gives you control over when a beneficiary receives their distributions. It also can give you some level of control over that person's life.

For example, maybe you have a grandchild who has talked about skipping college, but you think it would be very beneficial for them to get a college degree. You could put money in an incentive trust as their inheritance, stating that they can only access the trust after college graduation. You are essentially rewarding them for focusing on their education when they may not have done so otherwise.

They may think you are too controlling

But there are downsides, starting with the fact that some beneficiaries resent this level of control. They may be unhappy that you are trying to force them to accomplish certain goals or live in a specific way. The beneficiary wants to have the freedom to live their life as they choose, so they may wish that you had just left them the inheritance directly.

The trust may be too limiting

Another potential issue is when the trust is built around a very specific goal, and there are no provisions to handle future changes. Say that the beneficiary wants to join the military, so there is no need for them to get a college degree. Or say that they suffer injuries resulting in a disability, meaning they have to drop out of college. Do you really want these types of issues to prevent them from getting an inheritance?

As such, careful planning is necessary when using a trust, so take the time to look into all of your legal options.