An incentive trust is a type of trust fund that provides support to beneficiaries in exchange for compliance with specific conditions set by the grantor. The trustee disburses funds as long as the beneficiary honors the grantor’s wishes. The trust is designed to motivate beneficiaries to pursue specific goals or activities that the grantor considers in their best interests. A wide range of provisions can be included, and the trustee’s powers must align with the provisions. Working with an experienced lawyer can help design the trust effectively.
An incentive trust is a type of trust fund that provides support to beneficiaries in exchange for those beneficiaries complying with specific conditions put in place by the grantor trust. With this type of arrangement, the trustee of the fund will disburse funds to the beneficiaries as long as they honor the wishes of the grantor. If the beneficiary chooses not to comply with these wishes, support is terminated and assets held in check for the beneficiary’s care are reallocated to other beneficiaries.
Sometimes known as a conditional trust, an incentive trust is designed to motivate beneficiaries to pursue specific goals or activities that the grantor considered to be in their best interests. The idea is that the inheritance from the trust does not limit or hinder the beneficiary in pursuing those goals or activities. For example, a parent may establish an incentive fund for a child that provides monthly living expenses, with the provision that the child pursue and successfully complete a college degree. In order to facilitate the pursuit of the purpose, the parent can also authorize the trustee to disburse funds from the trust to help with school expenses. If the child completes his degree and meets the grantor’s wishes, the monthly payments continue and may eventually provide additional financial support for other matters, such as providing a down payment on a home.
The goal of an incentive trust is to provide for loved ones in a way that still motivates them to engage in activities that the grantor believes will provide them with the greatest degree of happiness and fulfillment. A wide range of provisions can be included in this type of trust agreement. The plan may require the beneficiary to be married by a certain age, pursue a specific type of career, or even stipulate that the beneficiary will receive financial support as long as they are caring for a sibling or other relative with special needs. As long as the provisions are not prohibited by law, it is possible to place any type of conditions on the receipt of funds from an incentive fund.
The scope of powers assigned to the trustee or fund administrator of an incentive fund must be in line with the provisions placed on the beneficiaries. For example, if the financial support for the beneficiary is based on the pursuit of a college education, the trustee must have authorization to disburse the funds necessary to pay tuition and tuition fees. To ensure that the arrangements governing support to beneficiaries and the extent of powers granted to the trustee are synchronized, working with a lawyer experienced in setting up trust funds will make it easier to design the trust and its arrangements effectively, enhance the modifications so that the grantor’s wishes are honored.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
