An “incentive trust” is a legal entity that holds and manages
assets such as money or property for a benefactor. Basically, it is a
trust that can conditionally reward a benefactor for reaching a certain
goal or behaving in a certain way. This can be quite useful for someone
with a large inheritance who wants to ensure that their children or grandchildren
are responsible enough to manage it, as well as encouraging positive behavior.
Incentive trusts are often created by individuals who want to instill
a productive work ethic in their children.
Restrictions in an Incentive Trust
The grantor can make an incentive trust as restrictive as they want it
to be, barring any sort of illegal requirements. You can set an incentive
trust to pay out at a certain age, either in a lump sum or in installments.
Planning to distribute funds in a staggered fashion over time can encourage
your children to responsibly handle their money, as well as preventing
them from squandering their inheritance quickly. Additionally, you can
choose to have your children only have access to your money by achieving
some sort of educational requirement, such as graduating high school.
A grantor can set an incentive trust to promote healthy lifestyles, ceasing
payments to the benefactor in the event that they engage in destructive
behaviors, such as drug or alcohol abuse. To encourage a positive work
ethic, terms can also be set to pay a matching amount for every dollar
that a benefactor earns through employment.
If you are interested in creating an incentive trust, a Santa Clarita
estate planning attorney from the Werner Law Firm can help your establish its terms. Over
the course of nearly 40 years, our firm has won several awards for our
excellence, including a “Best of SCV” award from
The Signal newspaper for the past five years in a row.
Contact our office today for a