One of the phrases you may hear when learning about estate planning is dead hand control. This morbid sounding phrase may make you think of a mummy, but it actually has to do with how your assets are handled by your heirs. Dead hand control allows, to some extent, for you to dictate when your property and other assets can be used by your beneficiaries. It lets you put stipulations on what your heirs do, even though technically the assets are now theirs.
Why Exercise Dead Hand Control?
Dead hand control is rarely used, but it is an option if you don’t completely trust your heirs. For example, if you know your child is horrible at managing their money, you may make a stipulation of their inheritance that they keep a job for a certain amount of time. If you have an heir who has struggled with drugs and alcohol, the stipulation might be that they show proof of sobriety for a specific number of years.
The benefits of using dead hand control is that you can be certain your heirs are capable of using their inheritance in a worthwhile way. You don’t necessarily have control of how your heirs use your assets, but you can control when they gain access to them.
How Does Dead Hand Control Work?
Dead hand control is exercised through a trust, specifically an incentive trust. Like all trusts, an incentive trust is managed by a trustee you name. This trustee is charged with communicating the stipulations of the trust to your heirs, confirming that they have met those stipulations, and then transferring their inheritance to them.
Are All Incentive Trusts Legal?
While many people create incentive trusts to truly help their heirs grow and overcome bad habits, some people create these trusts to micromanage what their children and grandchildren do. Those trusts are often challenged in court, and those challenges often succeed. Trusts that impede on your heir’s freedoms, for example, may not hold up in court. You cannot try to control your heir’s choice of religion or what job they get. You also can’t make the stipulation anything illegal or require your heir to divorce their spouse or abandon a child.
Need help determining if your dead hand stipulations are legal? The team at Michael F. Kanzer & Associates can help. Contact us today to set up a free consultation.