You can use an incentive trust to encourage smart use of your trust inheritances.
Creating a successful estate plan that accomplishes all of your goals for your family means using various interconnected estate planning tools and strategies. Your estate planning attorney at The Millman Law Group will guide you through the numerous options available to create a plan that suits your specific family and inheritance plans. Trusts are crucial to estate planning and can be customized in countless ways. One type of trust is known as an incentive trust. This type of trust creates provisions encouraging the smart use of trust inheritances. How does it work? Keep reading to learn more.
Trusts: Understanding the Basics
A trust is a relationship in which property is held by one party for the benefit of another. A trust is created by the Grantor, who transfers their property to the trust beneficiaries. Trusts can be broadly divided into two categories: testamentary or living trusts. Testamentary trusts are activated by a provision in the Grantor’s Will and do not become active during the Grantor’s lifetime. A living trust activates before death. Living trusts can then further be divided into revocable and irrevocable living trusts.
What Are Incentive Trusts?
“Incentive trust” is an informal name given to a trust that encourages good behavior and smart use of trust inheritances. This trust is typically a revocable living trust. However, you may also use a testamentary or irrevocable living trust. A revocable living trust is chosen because it offers the ability to modify the terms of the trust while you’re alive.
The terms of the trust make it an incentive trust because these terms provide guidelines to the beneficiaries. For example, a beneficiary will receive disbursements only if they do a specified act or refrain from doing something the Grantor deems essential. This something could be maintaining a grade point average in school, receiving a certain degree, or anything else the Grantor decides, provided these requirements are not illegal, unconscionable, or impossible to fulfill.
The Advantages of Using an Incentive Trust in Your Estate Plan
Although we would like to believe our beneficiaries will always be smart about their use of trust inheritances, it cannot be guaranteed. Sometimes, people may need an incentive to earn their inheritance and understand how to manage it properly. You can use an incentive trust to encourage your beneficiaries to undertake actions that improve their lives in the long term. For example:
- Education: You may require your beneficiary to attend a specific school, major in a particular field, maintain a G.P.A., or graduate by a specific age.
- Addictions: If a beneficiary has a history of alcohol, gambling addiction, or drug use, you may make distributions contingent on sobriety.
- Family: If continuing your bloodline is a significant concern, you could tie distributions from the trust to marriage or the birth of a child.
- Philanthropy: You may reward a beneficiary for engaging in philanthropic activities by matching contributions or allowing distributions to supplement the income of a beneficiary who chooses to work for a nonprofit or volunteer at an organization.
If you want to explore your options and the abilities of incentive trusts, contact The Millman Law Group today!
Estate Planning Made Easy With Millman Law Group
Millman Law Group, PLLC is rare because it’s one of the only law firms that offer life planning in South Florida. From life care planning to the preparation of detailed estate plans, Millman Law Group has committed to serving Floridian elderly communities in Boca Raton, Palm Beach County, Ocean Ridge, Hillsboro Beach, and many other areas since 2018. Our dedicated team also specializes in special needs Trusts and catering to any age demographic because we know for certain it’s never too early to start preparing you and your family for your future. For the latest news in estate planning and elder care law, follow us on Facebook, Twitter, Linked In, and Pinterest. You can also contact us at 561-463-6480.