Table Of Contents

Incentive Trusts For Your Arizona Estate Plan

If you have significant assets that you want to pass down to your heirs as strategically as possible, you probably worked hard to get where you are in life. Thus, you most likely understand the value of a dollar, and just how damaging it can be to be given too much without exerting effort. You might want to set certain benchmarks that your beneficiaries need to achieve before they can be bestowed with the fruits of your labor. This can be done through an incentive trust. An incentive trust is a special type of trust that encourages beneficiaries to reach goals and accomplishments before they receive funds from the trust. This is just one element of a fully realized estate plan, as you may need several other documents to set forth all of your wishes. To create an estate plan that suits your present and future needs, contact our Arizona law firm for your free consultation at 480-470-1504.

What Is An Incentive Trust?

An incentive trust is a type of conditional trust that the person creating an estate plan, or the testator, can use to set requirements before their loved ones will receive funds from the account. The three most common goals that testators seek to accomplish with incentive trusts are encouraging education attainment, encouraging working hard and having a successful career, and imposing moral or religious restrictions or incentives on the beneficiary. A trustee is assigned to make sure that the trust’s requirements are met. An incentive trust can be created as a revocable or irrevocable trust. Your attorney can help you determine which course of action is best for your situation. For your free consultation with an experienced Arizona estate planning attorney, call 480-470-1504.

Common Examples Of Incentive Trust Triggers

The testator can choose any conditions they wish for an incentive trust, but often benefit from hearing others’ ideas and tailoring them to meet their own family’s needs.

Graduating from college, trade school, graduate school, etc.
Achieving certain grades in school
Getting married and/or having a baby
Staying home from work to raise children
Working full-time for a predetermined amount of time
Completing rehabilitation for substance abuse issues
Remaining married- ceasing payments if the beneficiary gets divorced
Matching income earned by the beneficiary through their employment
In portions after reaching certain ages- e.g., 50% at age 25 and 50% at age 50

You may have unique and personal goals you wish to accomplish through your estate plan. However, it’s also best to avoid creating terms that restrict your beneficiaries’ options and overall satisfaction in life, as well as those that set your children up to lose appreciation for the value of a dollar. One way to avoid these issues is by setting a target for these types of conditions and allowing a trustee to decide if your beneficiaries’ actions are sufficient. For example, you may have a target for your children to complete an undergraduate degree at the local university. If one of your children completed an associate’s degree at community college and went on to earn a certification through trade school, and possibly even a professional license, the trustee may find that this equates to the effort that would have gone into obtaining a four-year degree. A testator creating an incentive trust should also select alternative beneficiaries to receive the funds from the trust if the requirements aren’t met, like your local school district or a charitable organization of your choosing.

Does reading the list of common triggers for incentive trusts give you ideas about what you want to do with your own estate? Or in the alternative, does it make you even more confused about what to do with your estate plan? Our Arizona estate lawyers offer free consultations so you can decide if retaining us to draft your estate planning documents is right for you. Get started today by calling 480-470-1504.

Creating The Rest Of Your Estate Plan

Distributing assets isn’t the only purpose of an estate plan. Additionally, there are other types of trusts you can create to accomplish goals besides incentivizing your beneficiaries to complete certain goals in life. Some of the other instruments you may want to use in your estate plan include:

Last Will & Testament: This is the fundamental building block of an estate plan, and you will probably create one as a base if you create an incentive trust. Your will can be used to distribute assets that aren’t distributed through your trusts, but it also serves two other important functions. First, it is the document a testator uses to select an executor, as well as alternatives or successors, for the estate. The executor makes sure that all documents are filed and the estate proceeds through probate court. The second function is selecting a legal guardian for your children. Obviously, this portion is only relevant if you and your children’s other parents pass away before they reach age 18.
Special Needs Trust: This is a type of trust you can create if a loved one has a serious medical condition or disability that will require lifelong medical care. This can be used to appoint a trustee who will make sure that necessary expenses like doctor’s visits, groceries, and home services are paid for with approval. The funds from this type of trust won’t disqualify the recipient from receiving government benefits like Medicare and Medicaid.
Educational Trust: This type of trust can be used to put money aside for your beneficiaries’ education. An incentive trust can be used to convince a beneficiary to obtain higher education, but the educational trust actually pays for it. If you expect your beneficiaries to attend college or higher-level education to trigger their incentive trust, you may want to consider creating an educational trust as well to help make that possible.
Power Of Attorney: This estate planning instrument is meant to give another trusted person authority to make important decisions in your life if you are ever unable to do so. Sometimes a power of attorney, or POA, is used when the testator will be out of the country or otherwise extremely busy, but it is most commonly used for a testator who is losing the legal capacity to make their own decisions.
Health Care Directives: You can use your estate plan to state which medical treatments you would like to receive and which you would rather avoid if you ever develop certain health conditions. In the alternative, you can select someone you trust to make these decisions for you.

Don’t Know Where To Start With Your Estate Plan? Call Our Firm For Your Free Consultation

An incentive trust is a great way to pass down your assets while making sure your beneficiaries do something to earn them. But improper execution could lead to confusion, delays in distribution, extra costs and taxes, and other stressors that you probably want to spare your loved ones. A skilled estate planning attorney in Arizona can make sure your goals are met so you can be at ease knowing that your estate will be distributed in accordance with your wishes upon your passing. To learn more about your options today with a free consultation, call 480-470-1504. Don’t hesitate to contact us today!