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Should Your Heirs Work for Your Money?

Incentive trusts can get your heirs to jump through hoops for your money, but is one right for your family? Weigh the pros and cons.

This story appears in the April 2005 issue of Entrepreneur. Subscribe »

It's not easy building wealth, and sometimes it's not easy giving it up--even to family. Incentive trusts, born of the stock market's glory days in the 1990s, are increasingly resurfacing as a way to hand over money or property with strings attached. The idea, in a nutshell, is to create financial incentives--or disincentives--for heirs to act in certain ways after you die.

It's hardly a new concept to put restrictions on a large bequest of money or property. It's almost estate-planning gospel, for instance, that trust-funders should limit the amount recipients receive until they are old enough to handle it wisely--whether that age is 18, 25 or 40. Incentive trusts take things a step further. They force recipients to do specific things to stay on the gravy train.

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