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Home » Estate Planning » Provide Guidance With an Incentive Trust

Provide Guidance With an Incentive Trust

July 27, 2020 by Pamela Potter

incentive trustYou have options when you are planning your estate, and this is one of the reasons why you should engage an estate planning attorney. If you have specific objectives, there is some type of approach that can be used to address them.

With this in mind, let’s look at the legal device called an incentive trust.

Encourage Positive Behavior

A large windfall of money can potentially do more harm than good if the recipient has not reached full maturity. You may have concerns about this if you are in a position to help younger family members when you are engaged in the estate planning process.

As a response, you could establish an incentive trust. The best way to explain how you can proceed is through the use of a simple example.

Let’s say that you have a grandchild that has not yet attended college. In the trust declaration, you can instruct the trustee to pay school tuition and cover living expenses while the beneficiary is a student in good standing.

You could allow for some type of lump sum distribution when the beneficiary graduates, and the trust can include additional incentives for postgraduate degrees. The trust could then provide a match for every dollar that the beneficiary earns after graduation to instill a work ethic.

There could be a provision for larger distributions when the beneficiary reaches certain age plateaus. This is an example of the way that an incentive trust can be used to encourage positive behavior.

On the other side of the spectrum, the incentive trust terms could guide the beneficiary away from self-destructive actions. If you have a person with a substance abuse problem on your inheritance list, you could include stipulations with regard to clean testing and rehabilitation if it becomes necessary.

Simply put, the incentives that you include are entirely up to you. The one caveat would be that you cannot require the beneficiary to do anything that is against the law.

Incentive Trust Trustee

When you establish an incentive trust, you have to empower a trustee to act as the administrator of the trust. Your first thought may be that the trustee must be someone that you know personally, and it is legal to name any competent adult who is willing to assume the role.

That being said, you may not know anyone who is qualified to administer a trust. Even if you do, longevity can be a source of concern, and it is also important to use a trustee who will manage the trust dispassionately.

Trust companies and the trust departments of banks offer trustee services, and some professional practices will act as fiduciaries. If you go this route, there would be no emotions involved, and the trustee would have established investment policies.

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We have always provided educational opportunities for members of our community through our seminars. At the present time, we are offering webinars so you can obtain all the same great information without leaving the comfort and safety of your home.

There is no charge at all to attend the webinars, but we ask that you register in advance so that we know how many people to expect. To see the dates and obtain more detailed information, visit our webinar schedule page.

Schedule a Consultation!

If you have already digested enough information to conclude that it is time to put an estate plan in place, we are here to help.

We know that it can be a bit uncomfortable to discuss personal matters with someone you have just met. We make every effort to make you feel comfortable from the outset, and we will provide personalized attention because every family is different.

You can schedule a consultation appointment with our attorney in Charlotte, North Carolina or Huntersville, North Carolina if you give us a call at 704-944-3245. The number in Ashland, Kentucky is 606-324-5516, and the number in Florence, Kentucky is 859-372-6655.  If you would prefer to send us a message, simply fill out the contact form on this website.

  • Author
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Pamela Potter
Pamela Potter
Owner and founder of the Ashland, Kentucky based Potter Law Firm, Ms. Potter concentrates her practice in the area of estate planning, estate administration, and elder law. Mrs. Potter’s goal is to help her clients plan secure financial futures for themselves and their families. To achieve that goal, her firm offers a wide range of estate planning services, including wills, trusts, and powers of attorney in addition to probate, estate administration, elder law, and Medicaid Planning services.
Pamela Potter
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Filed Under: Estate Planning Tagged With: Estate Planning, incentive trust

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About Pamela Potter

Owner and founder of the Ashland, Kentucky based Potter Law Firm, Ms. Potter concentrates her practice in the area of estate planning, estate administration, and elder law. Mrs. Potter’s goal is to help her clients plan secure financial futures for themselves and their families. To achieve that goal, her firm offers a wide range of estate planning services, including wills, trusts, and powers of attorney in addition to probate, estate administration, elder law, and Medicaid Planning services.

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Overall The Potter Firm was very professional. They took what could of been a very complicated process and were able to break it down so it was a lot easier to understand. We are confident we now have made the right decisions in our estate planning. Good firm to work with.

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