For Your Own Good Understanding Michigan Estate Planning

Aug 31 2009Incentive Trusts

A revocable Trust is a common estate planning vehicle that can provide for children or other beneficiaries after your death.  In some family situations, however, children or other beneficiaries may have shown very little financial ability or even a desire to seek employment.  In those situations, the Trust can be customized to provide certain incentives for those beneficiaries.  An example would be a Trust that upon the parent’s death sets aside a share for the son.  The Trustee is instructed to invest the assets of the share and provide the son with distributions of Trust income and principal but only to the extent that the son produces proof to the Trustee that he has earned income through employment.  The Trust provides an incentive to the son to get a job and earn money.  Upon the son showing proof of earnings to the Trustee, the Trustee would make a matching distribution, for every dollar the son earns he receives a dollar from the Trust.  If the son doesn’t work, then he receives no distributions from the Trust.  The Trust could also provide the Trustee with discretion to make distributions to the son under certain circumstances such as the son actually being unable to work due to disability or because the son is not working because he is the primary caregiver for children of his own.  A Trust can be drafted in many different ways and creatively to provide incentives to beneficiaries to act more responsibly.