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Friday, June 15, 2018

Incentive Trusts

One thing many people worry about is the best way to provide for their loved ones after they are gone. Sometimes, we want to leave assets or property to a family member, but worry about things like spending habits that may lead him or her to squander an inheritance. The desire to best serve our nearest and dearest lasts indefinitely. Fortunately, estate planning can help us fulfill this goal. One valuable tool in estate planning is the incentive trust. When properly used, an incentive trust can encourage your heirs to maximize the inheritance you wish to leave them and protect the inheritance from things like negative spending habits.

What are the Benefits of an Incentive Trust?

An incentive trust allows you to leave assets and property to a beneficiary and set conditions on how and when the contents of the trust are distributed. The conditions are intended to reward the beneficiary for things like reaching milestones or other positive behaviors. The conditions may also be intended to discourage destructive behaviors. Some examples of conditions you can put on the trust distributions may include:

  • No distributions until the beneficiary have completed high school

  • No distributions until the beneficiary attend college

  • Termination of distributions if the beneficiary is incarcerated

  • Termination of distributions if the beneficiary tests positive for illegal drugs

  • Distributions made to match income beneficiary generates

In the terms of the trust, you will direct the trustee managing the trust to make distributions or terminate distributions according to the condition(s) you have laid out. You can be as specific as you want in providing the trustee with guidelines so you can ensure that your true wishes and intentions for the trust are achieved.

Note that there are limits to what type of conditions you can include in an incentive trust. A court will not recognize the legitimacy of trust terms that would run afoul of the law and public policy. For example, you cannot promote any illegal actions. You also would not be able to make getting a divorce a condition of trust distributions. These types of conditions would not stand up to any kind of legal challenge.

When properly employed, an incentive trust will give you heightened control over what happens to your assets after you pass away. Conditions of an incentive trust can encourage positive behaviors among beneficiaries such as incentivizing strong work ethics and achieving educational milestones. An incentive trust can discourage drug use and, thus, encourage healthier living. This type of trust may also encourage heirs to become involved in a legacy you have left behind such as a family owned and operated business.

Designing Estate Plans That Inspire Confidence and Protect Your Wishes

The possibilities of estate planning go well beyond traditional notions of a will. An incentive trust is just one of several unique estate planning options that you should look into. At M&A Law Firm, we provide you with options to design an estate plan that is specifically designed to protect your wishes and maximize the benefits to you and your loved ones. Contact M&A Law Firm, P.C. today. We proudly serve Cook County and Skokie, Illinois.


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