Setting A Course With Incentive Trusts
One of the most difficult end-of-life realities to cope with for many people is the impact that their absence will have on their families. Even when you can come to grips with your own mortality, you have spent decades as a parent and grandparent. You can recall countless instances when your wisdom and experience was invaluable to family members, just as the wisdom of your elders was so important to you in years past. So when you are planning your estate you can leave money behind, but your inability to provide guidance to go along with it can be a source of concern.
You may not be able to provide advice directly after you are gone, but you can set your loved ones on a positive course through the creation of incentive trusts. With these vehicles you place assets into the trust, name your heir as the beneficiary, and appoint a trustee as you would with any trust. But, you place stipulations on the distribution of funds from the trust that are intended to influence the behavior of your heirs.
For example, let’s say that you have a grandchild or great-grandchild who has not yet completed college. You could allow for regular monthly distributions from the trust as long as he or she remains a student in good standing. Perhaps an additional distribution could be attached to making the Dean’s List.
There could be a lump sum distribution upon graduation, and additional distributions when graduate degrees are attained. Once your student is out in the working world his or her trust agreement could allow for ongoing distributions that match each dollar that is earned on the job.
This is just one example of how an incentive trust could be used to set a course for a loved one, but you can include any stipulations that you would like to as long as they are not illegal. These trusts may not be necessary or appropriate for every heir, but they can provide a viable solution when certain circumstances exist.
