As a parent, you have spent your life helping your children make the right choices. It started when they were young, but you stayed involved as they grew up. Even as adults, they ask you for advice. You help them out. You use your life experience to make sure they do not replicate your mistakes.
Plus, you have values. You want your children to adopt those values and follow in your footsteps. You want them to become upstanding citizens and set a positive example for their own children.
Now that you are doing your estate planning, you’re wondering if there is any way for you to pass these ideals and values on. Can you influence their decisions, even after you’re not around? You may be able to do so by using an incentive-based trust.
First off, the trust can set goals for your heirs. The money and assets in the trust can then pay out when they meet those goals.
For instance, you may want your heirs to go to college. Your trust could stipulate that they each get $100,000, on top of full tuition, if they graduate. Not only does this make education free for them, but it gives them a lot of incentive to see it through. If they consider dropping out, that $100,000 can keep them going.
Some parents also set professional goals. You may want your kids to pursue specific career paths. You know they come with financial challenges — starting a new business, for instance, does not always mean making money right away. The trust could offer financial support so that they do not feel like they have to take jobs they do not like just to pay the bills.
Values and ethics
The trust can also, within reason, address the way that the children live. You can pass on those values that you hold so dear. You can influence them to make what you deem to be ethical decisions.
For instance, perhaps you always avoided legal trouble, but you worry about your heirs. You have read far too much about the opioid epidemic, drunk driving, drug addiction and all sorts of behaviors that can ruin a person’s life. You could have the trust set up so that it only pays out if your heirs avoid getting arrested. You hope they make these wise decisions on their own, but the trust gives you one more way to protect them. You can help to start them on a path to success.
Setting up a trust
These are just two examples, but trusts are quite powerful and flexible. Every situation is different, and a trust gives you ways to influence your heirs you may never have considered before. Make sure you know what legal steps to take to set up an effective trust.