If you are on the outside looking in it may seem as though wealthy people who are planning their estates feel akin to jolly old St. Nick, capable of making the financial dreams of their loved ones come true. It would be disingenuous to suggest that being able to provide for your family after you pass on is not a blessing of sorts, but it’s not without its pitfalls.
We have all seen reports of the children of very wealthy people struggling in various ways throughout their lives, and there are those who have met tragic ends. There are also countless others who may not have been especially tortured who simply never reached their true potential because they saw no reason to work toward anything.
One possible solution that is often put to good use is the incentive trust. These are trusts like any other with your heir as the beneficiary, but you place stipulations that must be met in order for funds to be distributed. You can place any stipulations that you want to as long as what you are requiring is not illegal.
For example, you may set up the trust to make distributions as long as the beneficiary stays in college and provide for a lump sum distribution upon completion of graduate school. To promote a work ethic and a career path you could stipulate that the balance of the trust will be distributed in four benchmarks five years apart as long as this heir remains employed.
Should you have a family member who has a problem with self destructive behavior you could put stipulations in place that act as an incentive to avoid this activity. For example, you could allow for distributions contingent upon the results of ongoing drug testing and/or completion of a rehabilitation program.
Incentive trusts are not a panacea, but they are an option and something that you have in your estate planning tool kit should you feel as though creation of such an instrument may be able to provide you with some peace of mind.
- Medicaid Attorneys Explain How a Pre-Paid Funeral Contract Can Help - March 31, 2021
- What Is a QTIP Trust? - March 25, 2021
- How Would You Feel about a Robot Caregiver in the Future? - March 18, 2021