You Want Your Grandchildren to go to Harvard, Become a Doctor and a Concert Pianist?
Estate and Legacy Planning with Discretionary Incentive Trusts
So you want your children or grandchildren to:
- stay clear of illegal drugs
- graduate from your alma mater summa cum laude
- study your choice of business, medicine, or classical music…
- pursue a philanthropic or public service career
Of course you can model by example and encourage with books, mentors, and learning opportunities. You can also include discretionary incentive trusts in your estate and legacy planning.
What is a Discretionary Incentive Trust?
Incentivizing with a Discretionary Trust
A trust is the agreement to transfer assets to a trustee who will manage the assets according to the terms and conditions you describe in the trust document.
A trustee can be a person or a business authorized to administer trusts.
A discretionary trust allows the trustee to decide when the money – or other trust assets, should be given away. The person forming the trust can describe the terms and conditions for trust distributions that should be followed by the trustee. Benefits of discretionary trusts:
- maximum flexibility for addressing future circumstances
- minimize beneficiary lawsuits over trustee distributions
How can a Discretionary Trust Influence My Children or Grandchildren?
An option for estate planning is a Discretionary Incentive Trust. You can separate part of your estate with directions that it be distributed to your children, grandchildren, or anyone else, upon specific conditions. Examples of trust incentives:
> full living and college expenses if your child or grandchild attends the college of your choice
> payment for music lessons or sports fees
Additional distributions can be directed if your child or grandchild:
> maintains the grade point average you specify
> studies in the field of learning you specify
> receives a diploma – with your option to increase the financial distribution for graduating cum laude, magna cum laude, or summa cum laude
> works in the business or profession of your preference
Discretionary trusts can also address negative behaviors. Trust distributions can be reduced or not given for violation of behaviors you want to encourage, such as:
– drug, alcohol, tobacco or gambling abstinence
– safe driving records
Discretionary incentive trusts can subsidize lifestyle choices with distributions for:
- public service work, such as school teacher or missionary
- stay-at-home mom or dad parenting
- matching gifts for savings
- full or part-time employment
What Amount of Influence and Control Do You Want through a Trust?
If you can be creative, a qualified attorney can design your discretionary trust that encourages and discourages almost anything. You can design your trust for maximum incentives while your children or grandchildren are younger. You may believe that at a certain age it is no longer appropriate for your motivation or incentivizing through the trust.
What is Your Purpose in Creating an Incentive Trust?
You can describe your purpose in creating your trust in your trust document. Your values and goals can be summarized to explain why the trust assets will be distributed according to certain standards.
Discretionary Incentive Trusts Call for Careful Consideration and Careful Drafting
This general overview of discretionary incentive trusts is not legal advice specific to your situation. You should consult with the attorney of your choice for your specific situation – if you want your child or grandchild to become a concert pianist…