Wealthy families know it can be hard to motivate their children to be productive members of society when trust funds are available to support those children. I hear Warren Buffett quoted often in my estate planning practice: The perfect amount to leave to kids, he says, is “enough money so that they would feel they could do anything, but not so much that they could do nothing.”

Worried that access to unlimited funds is bad for their children’s independence, wealthy parents often turn to “incentive trusts” to hold their kids’ inheritances. These vehicles instruct a trustee not to give money to an adult beneficiary who is not engaging in a productive lifestyle such as working or caring for family members.

As a tool for influencing behavior, they are imperfect, however. It is unlikely that a trust fund by itself is going to make a child work. Research, in fact, tells us the opposite can be true. Behavioral economist Dan Ariely has found that people who expect a big reward for success at a cognitive task will do less well than those who receive a small reward. The pressure of the big payoff overwhelms the money motivation.

That pressure is often amplified if the child has financially successful parents. According to psychology professor Suniya Luthar, kids from wealthy families are more likely than those from the middle class to struggle with substance abuse, depression and anxiety. There are many reasons for these psychological difficulties, but Luthar suggests that excessive pressures to achieve may be one component. Many of the children who grow up with wealth go on to successful careers, excelling under the pressure. Many as well will believe that their value is tied too closely to societal markers of success, or that it is never possible to achieve the level of success of their parents. This fear of failure and self-doubt can make it more difficult for a beneficiary to become independent.

So money does not necessarily buy a child’s productivity. But all is not lost. According to Chloe Carmichael, a clinical psychologist who often sees successful and wealthy clients at her Park Avenue address, the healthier dynamic is for nobody to take responsibility for the beneficiary’s independence except the beneficiary. Carmichael has watched beneficiaries adjust and make a choice to be self-supporting when it is best for the beneficiary. Her message is that a trustee needs flexibility to craft and communicate limits tailored to each beneficiary’s individual personality and situation. With the right kind of support, a beneficiary may find internal motivation to choose to be independent.

Trustees can’t give a child internal motivation. But I believe there are things they can do to support a child’s independence: They can help a child build decision-making capacity and resilience, with appropriate and transparent limits.

The ‘Resilience’ Trust
When we look at all the weaknesses of incentive trusts, we can move beyond them and consider a modified structure that encourages a beneficiary to take responsibility for her own decisions and handle setbacks on her own. I call this a “resilience trust.”

Its first feature is that it doesn’t keep secrets from adult beneficiaries. Clients usually want to conceal from their children the amount of money in trust for them—or even hide the trust’s existence.

The resilience trust, however, values sharing information over secrecy. It assumes that the beneficiary already has a general idea about the family’s wealth and will understand that secrecy is a vote of no confidence.

The second feature of the resilience trust is the way it approaches the idea of acceptable behavior in the beneficiary. If a standard incentive trust offers a black and white expression of approval or disapproval, the resilience trust offers grey areas for both the beneficiary’s behaviors—and the trustee’s reactions. The trustee is encouraged to share the goals of the settlor with the beneficiary and seek to understand the individual’s reaction to goal-based limits. Testing limits may be an indication of the beneficiary’s journey toward independence and so should be an expected part of trust administration. The flow of funds in a resilience trust can be adjusted and does not have to be turned off.

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