What Is an Incentive Trust?

What Is an Incentive Trust? When you are planning your estate, passing along resources directly with no strings attached can be perfectly acceptable for some established people on your inheritance list. At the same time, there could be people in the family who could use some guidance. Under these circumstances, you could consider the creation of an incentive trust.

With an incentive trust, you include stipulations in the trust declaration. In this declaration, you name a trustee, and the trustee would follow your instructions with regard to the fulfillment of the requirements. If the incentives are met, monetary distributions would be distributed to the beneficiary.

To provide a hypothetical scenario, let’s say that you have a family member who has not yet completed her education. You could instruct the trustee to pay for college tuition, books, fees, and living expenses as long as the student remains in school.

After graduation, you could allow for a larger, lump sum distribution. You could allow the same situation to remain in place through graduate school.

To foster a work ethic, you could allow the trustee to match the beneficiary’s on-the-job earnings after graduation until a certain age threshold is attained.

In addition to the possibility of guiding a loved one toward positive behavior, you could use an incentive trust to steer a family member away from destructive behavior. Let’s say that you have an adult grandson who has always struggled with an addiction problem. You could make your grandson the beneficiary of an incentive trust.

The agreement could stipulate that the beneficiary will receive distributions after the successful completion of a treatment program. These distributions could continue as long as the beneficiary passes periodic substance abuse evaluations.

These are a couple of simple examples, but you can include any stipulations that you want to when you are creating an incentive trust, as long as you are not requiring the beneficiary to do something that is illegal.

Personalized Planning

When you are devising your estate plan, you should work with the understanding that different people in your family are going to have various different proclivities and needs. A well constructed estate plan take all of this into consideration.

This is why personalized planning is so very important. There is no one-size-fits-all estate plan, though there are websites on the Internet that make it sound like anyone can create his or her own estate plan using boilerplate documents.

If you would like to discuss your own unique estate planning objectives with a licensed professional, we would be glad to assist you. We offer no obligation initial consultations, and we can get to know you, become apprised of your goals, and make the appropriate recommendations.

To set up an appointment, send us a message through this page: Dallas TX Estate Planning Attorneys.