Many individuals who engage in estate planning worry that the assets that they worked hard to accumulate will be squandered away or otherwise taken advantage of by their loved ones. This is an understandable fear. After all, you want what’s best for your loved ones. But one of the great things about estate planning is the amount of control that it gives you. In fact, by utilizing incentive trusts, you can motivate your named beneficiaries to act in a certain way.
How incentive trusts work
Incentive trusts typically allow for the disbursement of limited funds to a beneficiary at regular and controlled intervals. The full amount of the trust, however, is usually only released when an identified condition is met. For example, your trust could call for a beneficiary to be paid $200 every month with the full amount of the trust, say $50,000, to be released upon the beneficiary’s graduation from college.
What kinds of conditions can you place on an incentive trust?
You can get creative with incentive trusts. Some people use them to ensure that a loved one remains employed for a certain period of time so as to avoid the squandering away of trust assets, while others require that a beneficiary get married before trust assets will be released. You can even dictate that a beneficiary receives substance abuse or gambling addiction treatment prior to the release of trust funds. Again, these trusts are about you retaining control.
Selecting your trustee
Of course, the actual distribution of assets is left to the trustee. Therefore, when selecting a trustee, you should do your best to make sure that he or she understands the intent of your trust. You can accomplish this goal by reducing your philosophy behind the trust to writing.
Planning for all outcomes
When creating an incentive trust, you should make sure that it is detailed and accounts for contingencies. For example, if your trust requires that your adult son remain employed full-time for five years before trust assets will be distributed, what will happen if he becomes ill and is physically unable to work? Without contingencies in the trust document, he may not be able to secure the trust funds that he now desperately needs.
Build the strong estate plan that you and your loved ones need
As you can see, estate planning gives you great control over your assets and your loved ones’ behavior, but it’s also very nuanced. That’s why many people in the Lancaster area turn to law firms like ours for assistance. That way, they can rest assured that their estate plan is sound, their assets are protected, and their loved ones will be motivated when the time comes.