A trust is a legal document that can help securely transfer assets from an estate to beneficiaries. With the right trust, an estate may avoid taxes, probate and challenges. There are many different kinds of trusts, including pet, generation-skipping, spendthrift, charitable and special needs trusts.
One trust that can benefit people who want to help ensure their assets are responsibly used is an incentive trust. An incentive trust allows the grantor to make unique clauses that limit how assets are used. The grantor can set specific conditions that beneficiaries must meet if they want to benefit from a trust. Here is what you can do with an incentive trust:
1. Funding a marriage
An incentive trust can be used to help fund a marriage. The trust could clarify that the funds can only be used if the beneficiary gets married. These funds could then be used to pay for venue, catering and other marriage expenses. Or, the funds could be accessed for any purpose as long as the beneficiary is married.
2. Supporting a child
A clause in an incentive trust could allow a beneficiary to access funds if they have a child. The funds could then be used to help support the raising of a child, such as funding clothing, food and medical expenses.
3. Funding an education
If a grantor wants to help a beneficiary undergo higher education, then an incentive trust could help. A clause could allow a grantor to access funds to pay for tuition, residency and college supplies. The clause may even limit access to funds proportionally to the beneficiary’s grades.
It is important to the wording right on an incentive trust. If a clause is too specific, then a beneficiary may never access trust funds. However, if the wordage is too ambiguous, a beneficiary may find a loophole. You can work with legal help to create an incentive trust for your specific needs.
