When you set up a trust, it can be very straightforward. You may just stipulate that the money in the trust is to be used for education expenses, for example.
But you can also get a bit more creative, especially if you use something like an incentive trust. This allows you to provide different incentives and goals for the beneficiary. They get payouts when they meet those goals, which is their incentive to live in a certain way.
Maintaining employment
For example, perhaps you know that the amount of money you are going to leave to your beneficiaries is enough for them to live off of. You may be worried that one of them will not maintain employment after receiving their inheritance. You are concerned about taking away their motivation to work.
To counter this, you could set up an incentive trust that pays them 5% of the total every year. But in order to get that 5%, they need to maintain employment for the entire time. This gives them an incentive to continue working in their career, even though they are inheriting a substantial amount of money.
But you may want to consider much more than just employment. Maybe you have a beneficiary with a drug addiction problem and you want them to avoid illegal drug use and arrest. Or maybe you have a beneficiary who is an artist, and you want them to continue working on their art, even if they’re living off of the proceeds from the trust. Maybe you just want to use the incentive trust to tell them that they can only have their inheritance after they graduate from college.
There are many different options, so just be sure you know what legal steps to take to set up the trust that is right for your family.
