You may find that there are seemingly countless details to concern yourself with when you are planning your estate as one thing keeps leading to another. When you get the numbers in line and position your assets optimally, you then have to consider the human element. After all, your heirs are all unique individuals and providing each of them with a proper inheritance may take more that simply placing a number next to their names.
Leaving someone a large inheritance can have a number of different consequences, and they are not always positive. People who have no monetary motivations in life can sometimes never reach their true potential, and easy money has at times been known to fan the flames of self destructive behavior. If you have concerns about some of your heirs being able to properly handle their inheritances, you may want to consider the creation of incentive trusts.
The way that these trusts work is that you fund the instrument and name your heir as the beneficiary as you would with any trust. But with incentive trusts you can place stipulations that must be met before distributions will be made.
For example, you may set up the trust to begin regular distributions only after graduation from college or graduate school. To encourage a work ethic, there are those who create incentive trusts that will make distributions as long as the beneficiary is employed or doing charity work. Such a trust may also be designed to steer an individual away from harmful behavior by requiring drug testing as a condition for distributions.
Incentive trusts serve a purpose, and though it is best if people make good decisions on their own, they are not always going to do so. When you set up an incentive trust you will never have that nagging feeling that you may be doing a loved one a disservice by making things too easy for them or financing a destructive lifestyle.
- How Will You Age in Place and Be Able to Die at Home? - August 16, 2020
- Beneficiary Designations and Other Non-Probate Transfers - August 15, 2020
- Leaving Assets Can Be Tricky – Part 3 - August 13, 2020
