When you are engaged in inheritance planning and deciding how you would like to provide for your various family members, the specifics of each individual’s age, personality, and station in life are going to come to mind. For many people making these plans is not as simple as looking at a pie and deciding how many slices to cut it into and how thick each slice should be. You may have the desire to guide your loved ones in beneficial directions and away from avenues that you deem to be undesirable.
One way that you can positively influence the behavior of an heir is through the creation of an incentive trust. Let’s say that you have a family member that has a history of substance abuse. You may be reluctant to leave this individual a cash inheritance with no strings attached for fear that he or she may see the windfall as a golden opportunity to indulge this habit. A possible solution would be to create an incentive trust that contained certain stipulations. For example, you could provide for regular monthly distributions from the trust contingent upon passing a drug test. Something like this may sound draconian to some, but it could also save this loved one’s life.
Many people are concerned about the possibility of a large inheritance resulting in an heir never achieving his or her true potential because it removes financial need from the equation. One way to address this concern would be to create an incentive trust that will distribute a dollar for every dollar that the beneficiary earns on his or her own.
You can set up an incentive trust with any type of stipulation you want to as long as you are not requiring the beneficiary to do something illegal. Keep this in mind when you are planning your estate and you may be able to leave a legacy to your loved ones that is more valuable than money alone.
- Is In-Home Care for Elders Covered by Medicare? - February 7, 2023
- Is Estate Planning Only for the Rich? - January 19, 2023
- How Do You Plan Your Estate When You Have a Business Partner? - January 5, 2023