There are a lot of different ways to leave assets to the people on your inheritance list. An ideal solution exists for every situation, so you should explore all of your options so you can make fully informed decisions.
With this in mind, let’s look at the very useful estate planning device called an incentive trust.
Throughout your life, family members may have come to you seeking guidance and advice. At some point, you will not be around to give it, but you may be in a position to provide them with financial resources.
This can make life easier, but there is a potential downside as well. If you leave a significant inheritance to someone that has not achieved their full potential, they may not have the same motivation to make their own mark in the world.
As a response to this type of situation, you could make a loved one the beneficiary of an incentive trust. The best way to explain the value is through the use of a hypothetical scenario.
Let’s say that you want to guide a young heir toward higher education, and you would like to instill a work ethic while you are at it.
You could establish this type of trust and name a trustee to act as the administrator. A professional fiduciary can be a good choice, because the trust would be administered without emotion. There would be no longevity concerns, and an experienced, qualified financial manager would be at the helm.
In the trust declaration, you could instruct the trustee to provide a certain amount each month as long as the beneficiary remains in college. Of course, tuition, books, and fees would also be paid by the trustee.
It would be possible to incentivize the beneficiary to attend graduate school by conditionally increasingly distributions. You could also allow for a larger lump sum distribution after graduation.
When it comes to the work ethic part of the equation, you could allow for a dollar for dollar match of the salary that is brought in by the beneficiary. Subsequently, you could make the rest of the funds available when the beneficiary reaches certain age plateaus.
This is one example, but the possibilities are endless. In addition to guiding people toward positive behavior, you can also include incentives that would lead the beneficiary away from self-destructive actions.
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Many people put estate planning on the back burner under ordinary circumstances. Since we have been trying to adjust to the pandemic reality, this gives folks another reason to put their responsibilities on hold.
Though this is understandable, in fact, this may be the ideal time to put a plan in place. We are offering remote consultations, so you can get the help that you need without leaving the comfort and safety of your own home.
If you are ready to take action, you can schedule a consultation if you call us at 513-721-1513. There is also a contact form on this website you can use to send us a message.