There are many different ways to arrange for assets to be transferred to your loved ones when you’re planning your estate, and the correct vehicle can vary depending on the personal proclivities of the beneficiaries involved. You may have no concerns about leaving a direct inheritance to those who are mature and established in their own right, having demonstrated the ability to handle their own affairs effectively. But, on the other hand, you may have heirs who are not be ready to manage large inheritances on their own with no strings attached.
For this reason, many people come to the conclusion that the best way that they can provide for some family members is to lead them on a path to self-sufficiency through the creation of incentive trusts.
With incentive trusts, you name a beneficiary and appoint a trustee, and you include stipulations that must be met in order for the beneficiary to receive distributions from the trust. For example, if you have a young family member who is still of college age, you could allow for ongoing distributions as long as he or she remains a student in good standing.
You could then choose to provide a lump sum upon graduation, and another upon completion of each level of post-graduate work. Some people will take this a step further and encourage a work ethic by allowing for matching distributions from the trust for every dollar that is earned by the beneficiary after he or she begins a career.
This is just one example, but you can include almost any type of incentives you would like when you are creating the trust. Incentive trusts can serve a useful purpose under many circumstances and they are something to keep in mind when you are planning your estate.