Incentive trusts can be a good way to get your heirs to live in a manner you would approve of. They hinge on the idea that the person has to hit certain goals to get the yearly payouts from the trust; that’s their incentive.
For instance, an incentive trust could reenforce positive behavior by paying out the same amount that someone earns while working. In this way, it rewards hard work and advancement. Many parents are concerned that leaving a trust for an heir may ruin their drive to earn their own money. This gets around it.
The trust could also punish negative behavior. For instance, perhaps an heir has a history of drug use. The trust could state that they only get the yearly payout if they don’t use any drugs during that year. They have to avoid legal trouble.
One thing to keep in mind is that you must think about how the future could potentially change. For instance, what if your heir gets laid off from their job due to a recession? Do they not get anything? Or what if the drug they use is legalized in the United States? Do they still get the payouts even if they use it now that it’s legal to do so?
Don’t assume that things are static. They can change a lot from the time you draft the trust to the time that your heir uses it. Make sure that you take that into account and consider all of the ways you can set the trust up to work in the present and the future.