An important concept to remember is that the wealth you are planning for is your own, and there’s nothing wrong with attaching incentives or disincentives to the inheritance because it was created by your own hard work and effort! Nobody wants to think that the results of a lifetime of labor are going to be wasted within weeks or months after death.

The best plan is to educate your beneficiaries throughout your life on how best to manage money. Sometimes that’s possible, but sometimes it’s not. And sometimes the beneficiaries dismiss the training. And although you may feel that you don’t want to “control from the grave” or “attach strings” to the inheritance, incentive planning is often the best (and kindest) way to enhance the lives of your beneficiaries. So here are some suggestions for creating incentives and disincentives in your plan.

To Promote Education:

  • Your plan could provide that the Trustee will pay all the expenses for a college education at the undergraduate and/or graduate level. Or you might specify that only tuition will be paid, and that the beneficiary will be responsible for other costs.
  • You could authorize funds for a traditional 4-year degree program as well as for technical training for pursuing a career that does’t require a traditional college education.
  • You could instruct the Trustee to match any scholarship earned by beneficiaries, thus encouraging them to do their best to earn those scholarships.
  • You might provide extra distributions to those beneficiaries who achieve top grades, or provide different levels of distribution for different grades earned.

To Preserve and Strengthen Family Bonds and Harmony:

  • You might designate funds that are to be specifically used for regular family vacations or to maintain a family vacation home.
  • You could assist your child or grandchild in getting financially established by paying for the expenses of their first wedding, and/or providing the down payment for their first home.

To Inspire Your Beneficiaries in Their Work Ethic:

  • You can provide distributions to match the beneficiary’s annual income. As they work hard and grow in their career, they are rewarded by both their employer, and by you.
  • Or you might decide to provide extra distributions to a beneficiary who chooses to become a member of the clergy, who joins the military, or who pursues a career that has social value, in spite of lower pay.
  • If you want to encourage entrepreneurial activity, you might provide the funds to start a new business.

To Encourage Your Loved Ones to Emulate Your Philanthropy:

  • You could create a charitable Family Foundation, allowing your children and/or grandchildren to participate in making decisions and contributions to charities supporting your philanthropic goals. This not only creates charitable awareness, it also gives them a special favorable status in the community.

Of course, in addition to encouraging behavior, your planning can also discourage unwanted behavior.

  • Your plan could provide that the Trustee may cut off distributions to a beneficiary who becomes addicted to drugs, alcohol, or gambling; or pay for a program of treatment for the addiction.
  • You can discourage your beneficiaries from wasting their inheritance, or becoming dependent or lazy by providing that distributions will be made only as long as they remain gainfully employed or demonstrate steady progress toward becoming gainfully employed.
  • You can also establish guidelines providing that funds are to be used only for needs, and not for luxury items; providing specific examples, or leaving it to the discretion of the Trustee.
  • You could restrict funds if a beneficiary gets involved with a cult – although you’ll have to specify how that is defined, or appoint people to make that determination after you’re gone.

As you can see, the opportunities to use incentives in your planning are limited only by your imagination, your values, your priorities, and your dreams for your heirs.

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