A trust is a document you can use alongside your will to protect assets during and after your life. With the right trust, you can avoid estate taxes, disputes and probate. There are many kinds of trusts you can make, such as a generation-skipping trust and a charitable trust. However, you and your beneficiaries may greatly benefit from an incentive trust.
An incentive trust allows you to set conditions that your beneficiaries must meet if they want access to trust funds. You can imagine an incentive trust as a way to motivate your beneficiaries to take action in their lives. Here are several uses of incentive trusts:
Encourage higher education
You could make an incentive trust to push a beneficiary to go to college or grad school. Funds in an incentive trust could pay for tuition, school supplies, books, food and rent. You could also have an incentive trust to give funds to a beneficiary proportional to their grade point average (GPA). For example, the higher a beneficiary’s GPA, the more funds they have access to.
Fund a wedding
If you are aware that a beneficiary will one day marry the love of their life, you could create an incentive trust to help fund a wedding. The funds could be accessed to pay for wedding expenses, such as suits, dresses, venue and honeymoon trips.
How an incentive trust is worded is often very important. If an incentive trust is poorly worded, your beneficiaries may find loopholes or may be restricted from funds altogether. You can reach out for legal guidance to help you draft an incentive trust.