With great inheritance comes great responsibility: So how can you ensure that a large sum of money will be used the way that you intended? Take a moment to learn how incentive trusts encourage hard work and positive behavior.
Incentive trusts are inheritances structured with specific instructions on how trustees can use their funds. They are designed to provide a safety net without having to worry about heirs spending the money on things like luxury cars or drugs. The following are some ways that incentive trusts can be structured and distributed:
There are various ways that parents and grandparents can use the funds to pay for their trustees’ education. They can structure a trust in such a way that it covers the cost of a private high school or only in-state undergraduate tuition. They can also wait to dispense funds until their trustee graduates and receives a degree.
Parents and grandparents often worry that providing financial support will discourage their heirs from working hard and having the drive for success. An incentive trust can be structured so their trustees must be making a certain amount of money—or even match the funds on a dollar-for-dollar basis—in order to receive the inheritance.
Incentive trusts can be used to support an heirs’ family during milestones of their life. For instance, funds can be dispersed when the trustee gets married or when they have a child. They can also be used as a startup fund by matching the down payment of the trustee’s first house.
The trust can be used as a reward for sobriety if the parents or grandparents are concerned that their heirs would waste their inheritance on drugs and alcohol. This is beneficial especially if there is a history of substance abuse. They can work with organizations and support groups to ensure that the money does not contribute to such behaviors.
When one receives a large amount of money that they are not used to having, he or she can have a shift in attitude regarding wealth. Parents and grandparents can continue to instill their values and beliefs by requiring their trustees to donate a certain amount to a charitable organization. Some believe that is requirement is humbling to their heirs and will continue to encourage them to make the world a better place.
Parents and grandparents can have a peace of mind as incentive trusts allow them to have a say in how their money will be spent. However, like any legal document, these trusts must be carefully constructed to ensure that the terms are both clear and do not violate any laws. To discuss the different ways you can structure of your incentive trust, contact experienced estate planning attorney, Doug Lauenstein, today.