Some people wonder what their family and loved ones will do with their inheritance. Will they use their inheritance to start a business? Will they fund their college education using their inheritance? Will their inheritance be wasted on poor investments?
If you are worried your legacy will be wasted, you may want to consider making an incentive trust. An incentive trust allows you to control how your assets are used after you pass away — and it can help your loved ones avoid some serious financial regrets in the future.
3 ways to control how your legacy is used
When forming an incentive trust, you essentially place conditions that limit how those trust funds are accessed and/or used. Here are a few common conditions used to structure incentive trusts:
- Education: This is often done to ensure that a child or grandchild uses their inheritance to further their higher education. Your beneficiary may not be allowed to access trust funds unless they are actively enrolled in college or grad school. You can also limit disbursements from trust funds based on your beneficiary’s grade point average (GPA). This can encourage your loved one to not only go to school but also seek good grades without worrying about student loans.
- Marriage: You could make an incentive trust to encourage a loved one to get married. Trust funds could be distributed to a beneficiary to pay for the wedding venue, wedding dress and honeymoon. You could even set aside funds for a substantial wedding gift or a down payment on a marital home.
- Business: An incentive trust can be used to help a beneficiary start their business. The incentive trust can distribute funds to a beneficiary for every dollar their business makes. This can help a beneficiary afford certain business expenses and continue to stay open during economic hardships.
If you want to learn more about incentive trusts, reach out for professional legal guidance. It’s always wise to explore all the options, including ways to make such trusts flexible enough to respond to unforeseen events.