Through hard work and careful planning, you have built a life of which you can be proud. One of the great things about a bountiful estate is being able to create a legacy for your children and grandchildren. However, like many, you probably have certain family members who might appreciate an inheritance more if it helped them achieve what they otherwise may have put off.
Incentive trusts are becoming more popular as people discover how motivating an inheritance can be. As with other revocable trusts, your incentive trust can include specific instructions for the distribution of your assets. Those instructions will reward your heirs for behaving in certain ways.
Benefits for your beneficiaries
You can use an incentive trust to encourage a beneficiary to stay in school or earn a degree. This can be as general or specific as you would like – distributing funds semester by semester, as long as a certain grade point average is maintained or even for completing a certain course of study. Similarly, a trust may allocate funds to an heir who gets or keeps a job, takes an active role in the family business or performs acts of generosity in the community.
If you have watched with sorrow as a beloved child or grandchild struggles with addiction, you may be reluctant to drop a sum of money into his or her hands. An incentive trust can regulate the distribution of assets to an heir who remains sober and healthy.
Weighing the pros with the cons
While the benefits of the incentive trust may sound appealing, the drawbacks require consideration as well:
- Your heirs may resent you if you set goals that are strenuous or unappealing.
- The instructions you leave in your trust may limit your heirs’ abilities to pursue their own professional and personal interests.
- The goals you set may be unrealistic, unattainable or inappropriate for certain heirs.
- Your heirs may see the trust as an effort on your part to control them even after you are gone.
Achieving a delicate balance is key, and this may require allowing a certain degree of flexibility for your trustee. People’s lives change, and your heirs may make decisions that do not comply with your instructions but are noble nonetheless.
Although incentive trusts offer tremendous rewards to those designated as beneficiaries, the trusts themselves are complicated to create. Having the help of an estate planning attorney will be invaluable. The right attorney will take the time to assist you in creating an estate plan worthy of your lifetime of accomplishments.