A trust is a legal document that helps protect estate assets. A trustee is designated in a trust to manage and distribute trust funds. A trust works very similarly to a will. However, one of the key differences is that a trust can be used for particular purposes.
One unique kind of trust is an incentive trust. An incentive trust allows you to set terms and conditions that must be met before trust funds are distributed to beneficiaries. To understand how this works, you should continue reading:
Funding a beneficiary’s education
You may want a beneficiary to go to school. However, higher education seems to get more expensive every year. To help fund a beneficiary’s education, you could create an incentive trust. When using an incentive trust to provide funding for schooling, you can limit the access to trust funds for only school purposes, such as classes and school supplies.
For example, you may allow a beneficiary to access trust funds only if they are actively enrolled in school. You could even set terms so trust funds are only distributed to a beneficiary based on their grade point average. In other words, the higher grades a beneficiary receives, the more funds they can access from an incentive trust.
Matching a beneficiary’s income
You could set a clause in an incentive trust that helps financially support a beneficiary while making it so they are not entirely dependent on trust funds. The terms of a trust fund could match a beneficiary’s income. In other words, every dollar a beneficiary makes is a dollar received from an incentive trust.
Incentive trusts often require very specific language. Helping ensure an incentive trust is protected from loopholes may require legal help.