What would you do if you suddenly inherited a large amount of money? Would you buy everything you ever wanted? Would you invest it in the stock market? Would you give it all away to charity? You may need to consider these kinds of questions before leaving your estate to your beneficiaries.
When creating your estate plan, you can control how your beneficiaries use their inheritance with the use of an incentive trust. An incentive trust allows you to set rules that beneficiaries must follow if they want access to trust funds. There are many ways to use an incentive trust. Here are a few ideas:
You want to put your child through college
Every parent wants to see their children become successful. You can do that by creating an incentive trust and helping your child through college. An incentive trust could allow your child access to trust funds if they are enrolled in higher education. You could also limit access to trust funds if your child performs poorly in classes. This allows trust funds to be used on school supplies, rent, college tuition and other expenses.
You want to pay for wedding expenses
Do you have a family member who one day intends to get married? You could set aside assets in a trust fund to pay for this family member’s wedding expenses. For example, a beneficiary could access an incentive trust if they are getting married. Trust funds could then be used to pay for catering, a wedding dress and other relevant expenses.
You want a beneficiary to work for their inheritance
You may have a beneficiary who you know would spend all of their inheritance. What if you wanted this beneficiary to put in more effort for an inheritance? With an incentive trust, you could make a beneficiary work for their inheritance. For example, every dollar a beneficiary earns is a dollar they can take from an incentive trust. This could encourage your beneficiary to start their own business or find a fulfilling job.
If you want to draft an incentive trust, you should consider reaching out for legal guidance. While incentive trusts can be useful, it is important not to make them too restrictive, just in case of unexpected situations. An experienced attorney can guide you.
