You can’t always know what will happen to your assets after you pass away. However, you can have some control over who inherits from your estate. Protecting your legacy from being mismanaged or wasted may require an incentive trust.
An incentive trust is a legal document that allows you to control how trust funds are used. You can set the term of an incentive trust so that it limits how beneficiaries access trust funds. Here is what you should know:
3 uses of an incentive trust
The terms of an incentive trust can allow you to incentivize your beneficiaries to reach a desired goal if they want to access trust funds. Here are a few possible ways to use an incentive trust:
- Marriage: Perhaps you have a dream that a beneficiary will one day get married. You want their wedding to be magical. So, you can create an incentive trust that allows a beneficiary access to funds if they get married. Trust funds could be used to pay for the venue, attire and other expenses.
- Education: You may have a beneficiary who wants to pursue higher education. To help encourage your beneficiary to reach their dreams, you could put funds in an incentive trust. Funds could be distributed to a beneficiary based on their grade point average.
- Business: You may make an incentive trust to encourage a beneficiary to take on the family business. For as long as a business is successful, your beneficiary could have access to trust funds.
It’s hard to be specific about the terms of an incentive trust. However, you don’t want to be overly specific, preventing your beneficiaries from accessing their inheritance. You can reach out for legal guidance to learn more about your estate planning options.