A trust can be included in your estate plan to protect your assets. With the right trust, your assets can also avoid probate, disputes, taxes and other challenges. However, there are many different kinds of trusts you can draft. One such type of trust you may wish to explore is an incentive trust.
An incentive trust allows you to make a specific clause that can help prevent the misuse of assets. Your beneficiaries may need to meet the terms of the clause if they wish to access trust funds. There are several ways you can draft an incentive trust clause. Here are some examples:
Encouraging a higher education
You may have a beneficiary who is going through college or grad school. You could set up an incentive trust to help fund their student loans, living expenses and textbooks. To help prevent your beneficiary from spending their inheritance irresponsibly, you could create a clause that only allows them access to funds if they are enrolled in college. The trust could also allow the disbursement of funds based on their grade point average. The remaining funds could be dispersed if the beneficiary graduates.
Funding a wedding
Your beneficiary could plan on getting married in the future. You could use an incentive trust to help afford any wedding expenses, such as venue, honeymoon vacation and wedding outfits. However, the incentive trust may only be accessible after your beneficiary is officially married.
Supporting substance recovery
You may have a beneficiary who has a substance abuse problem. An incentive trust could help them recover from their addiction by allowing them access to funds for every month or year they are sober. The funds could be restricted if the beneficiary continues using addictive substances.
Legal guidance can help you explore your trust options so that they can truly be tailored to your goals.