When setting up an incentive trust as part of your estate plan, it gives you a chance to have some control over a beneficiary’s life after you have passed away. You give them different incentives or goals to accomplish, and they then obtain their inheritance as they do so.
Exactly how you want to use this is up to you, as trusts give you a lot of flexibility to make unique plans based on your family’s personal situation. Below are some examples of how you could use an incentive trust to accomplish your goals.
Avoiding the negatives
For one thing, you can use an incentive trust if you have a beneficiary who has a problematic history of poor behavior.
For example, perhaps one of your beneficiaries has a long history of drug use. You do not want them to immediately spend the inheritance on illegal substances, and you would like them to turn their life around. You could state that they can take annual withdrawals from the incentive trust, but they only get those withdrawals if they stay out of legal trouble and they are never arrested on drug charges.
Promoting the positive
You can also focus on positive outcomes. One common example of this is if you want to give a young beneficiary an incentive to get a college degree. The incentive trust could be set up so that they can only access it after graduation, meaning that they will have a very solid reason to focus on their education until they complete college.
Establishing the trust
These are just examples, so you can use an incentive trust in any way that you see fit. Just be sure that you know what legal steps to take to establish the trust and get everything set up.