Who knew a parent or grandparent could continue encouraging his or her children or grandchildren to live healthy lives and work and study hard even after his or her death. Florida residents may be interested in learning that an incentive trust could serve that purpose. This type of trust — when drafted wisely and without being insensitive and controlling — can pass wealth in the form of valuable life lessons rather than money to the younger generation.
The pros of an incentive trust are varied, but achieving the intended purpose will require the testator to communicate and explain intentions to those who would be the recipients of the trust. It can be used to encourage philanthropy and pursue higher education and healthy living along with a sound work ethic. Proper financial planning can be encouraged, and the mismanagement of wealth can be discouraged.
Advisors warn that great care must be taken when drafting an incentive trust to avoid achieving the opposite from what was intended. To accommodate changing circumstances, the trust must be flexible. Also, if beneficiaries feel they are being punished, resentment may ensue. It is important not to include any provisions that may encourage illegal activities.
Incentive trusts can be an effective way to encourage loved ones to uphold family values, but setting up the trust and choosing the perfect trustee may be quite a challenge. Florida residents who consider to include incentive trusts in their estate planning will likely have many unanswered questions. As with other trusts and wills, the most logical step would be to utilize the skills of an experienced estate planning attorney.
Source: investopedia.com, “Encouraging Good Habits With An Incentive Trust“, Stan Murray, Accessed on March 17, 2017