Another key feature of this trust is that it should accommodate failure. The beneficiary should be encouraged to make decisions and feel the impact of those decisions. Consider a climber in a harness: If there is enough slack in the rope attached to it, when the climber falls, she can feel it and process what went wrong without getting seriously injured. If the rope has too much tension, however, the climber doesn’t even realize how much she’s being pulled up or supported by somebody else. A trustee should make sure there is the right amount of slack so the climber gets a true feeling about her own efforts.

The trustee of one of these vehicles should also support resilience-building activities. Studies show that wellness is a key factor in building resilience, so expenses for things like therapy, a nutritionist or yoga classes could all be considered within reason. The trust should also allow for the beneficiary’s intimate involvement in the community and her mastery of skills that help her build internal fortitude. The trustee, for instance, could support lessons outside of the standard educational curriculum, even for beneficiaries who would not meet the qualifications of a typical incentive trust.

A resilience trust, in practice, would look much like a discretionary trust: The trustee would use his or her own discretion about what is best for the beneficiary given the settlor’s specified goals. It would require flexibility, not mandatory maintenance, support, health or education. When it comes to the beneficiary’s behavior, the trust would consider her internal, rather than external, motivation. The trust instrument would contain a clear description of the settlor’s goals and priorities in line with encouraging a beneficiary’s resilience and independent decision-making. The drafting attorney would carefully review provisions about the right of the beneficiary to information. Finally, while the beneficiary’s parents are alive, they would prepare her for the inheritance with continuing conversations, much as Warren Buffett has done with his children, so that the limits discussed with the trustee do not come as a surprise.

We dub this a “resilience trust” because it supports resilience-building efforts rather than mandating a particular lifestyle choice.

It is the hope, although not necessarily the outcome, that resilient trust beneficiaries will avoid many of the perils that lead to a lack of productivity: the fear of failure and self-doubt that often plague children of wealth.

Attorney Sarah H. B. Kahl is a partner in Venable LLP’s Tax and Wealth Planning Practice.

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