The vast majority of estate planning lawyers get requests for trusts that "motivate responsible behavior by the next generation," said Los Angeles lawyer Jon Gallo, who presented an overview of the topic at the annual Heckerling Institute on Estate Planning.
By Stephen K Lehnardt
If you are leaving behind an inheritance for the good of your young loved ones, you likely want to ensure that the inheritance will be a blessing and not a curse. Are they ready for the responsibility of having wealth? Or will they use it for "fun" to their own detriment? With careful planning you can make the inheritance itself provide the incentive to engage in good behaviors.
Incentivized inheritances offer you the chance to give the gift of possibilities and a secure future. Properly planned, such an inheritance can make your heirs pause to respect the inheritance and take responsibility for it. The Chicago Tribune looked into the topic in a recent article titled “Making sure your kids are trustworthy.”
Basically, to incentivize an inheritance is to build certain conditions into it. Ideally these conditions offer an heir a chance to grow and take responsibility. Want the inheritance? First, finish college, or go volunteer, wait until you’re a certain age, or just uphold shared values in your life. These are the kinds of conditions you could set for an inheritance and ask your heirs to work for them. This can be done with a will, however, for greater effect consider a trust. Specifically, many find an “incentive trust” or the more hands-on “principle trust” to be a powerful tool.
If you’re going to ask your heirs to think, then you’re going to have to expect the same of yourself. Incentive plans take a careful hand and a special awareness of your heirs, their motives and their possibilities. You don’t want to accidentally disinherit or dis-incentivize, for example. Finally, when it comes to actually putting the words to paper it takes some careful drafting to get it right and think of all the options. If you want your heirs to learn and grow, then it is worth the time and treasure to work with competent counsel and with your loved ones directly to build the best plan.
For more information in Liberty, MO and the Kansas City Area about effective estate planning and to access free information and tools to organize your estate, visit our elder law and estate planning website.
Reference: The Chicago Tribune (May 8, 2014) “Making sure your kids are trustworthy”