Palm City Family Incentive Trusts
Parents tend to worry about their children’s behavior. As children become adults, those worries change from wondering if the kids did their homework to hoping they will make sound financial decisions. One way to encourage fiscally responsible behavior is through a family incentive trust. But, what can this trust do that a parent’s chore charts and withheld allowance did not? Our Palm City trusts lawyer can help you and or family understand how a family incentive trust can be beneficial.
Explaining Family Incentive Trusts
Like any trust, a family incentive trust is a legal entity formed to hold and manage assets for the benefit of another person. Trusts are formed and funded by the grantor, also known as a settlor.
There’s always a reason for forming a trust. The key difference with a family incentive trust is that distributions may be based on a beneficiary’s behavior.
How Can a Family Incentive Trust Help my Family?
A grantor might use this type of trust to motivate positive behavior from one or more heirs. Good behavior might include graduating from college or choosing a career. If the heir hits the mark, trust funds are distributed.
However, distributions may be withheld from an heir who does not meet the requirements or who engages in some kind of undesirable behavior. A trust might include provisions prohibiting distributions to heirs who are addicted to illegal drugs or alcohol.
Staged withdrawals based on age are another option. For example, a trust might be structured to release income or principal to an heir at ages 25, 30, and 35.
Finally, an incentive trust can encourage business succession. Trust distributions may depend on the heirs’ participation in a family business.
Reasons Not to Form a Family Incentive Trust in Martin County
It’s up to the grantor to decide if the pros outweigh cons like:
- Family incentive trusts may inhibit a child’s entrepreneurial spirit. An heir may work in the family business rather than pursuing their own business ideas.
- Some of the requirements or goals may be seem unrealistic or unfair. For example, making a music-loving child go to med school to avoid disinheritance is not likely to strengthen the parent-child bond.
- Some heirs may become angry or resentful. Depending on the terms, a family incentive trust might appear to be intrusive and overcontrolling
Coordinate with a Martin County Family Incentive Trust Attorney
As a Florida attorney board certified in wills, trusts & estates, Attorney John Mangan helps his clients develop complete estate plans. To schedule an appointment, call us at 772-324-9050 or fill out our Contact Form. Our office is conveniently located in Palm City, Florida. We also help clients throughout Florida, including Stuart, Palm City, Hobe Sound, Jupiter, and Port St. Lucie.