Grand Rapids Wills and Trusts Lawyers See a Rise in Incentive Trusts
A growing number of people in Grand Rapids are realizing that they can have more of a say in how their assets are used after they have departed and protect those assets for their loved ones. The use of incentive trusts has increased as a result. Parents, especially, are directing their trust lawyer to add guidelines and stipulations that need to be met in order for their kids to receive proceeds from the trust as well as adding provisions to keep the funds protected from creditors and future ex-spouses.
These stipulations or conditions are used to encourage the heir to conduct himself or herself in certain ways, and noncompliance means that funds won’t be distributed. It sounds kind of harsh, but there are actually a lot of positive ways you and your Grand Rapids trusts lawyer can use this tool. For example, if you have a child who is talented in the arts, you may choose to finance her living expenses so she can pursue her passion rather than having to do undesirable work just to make ends meet.
One of the most common ways that parents direct their trusts attorneys is to make college graduation a condition for receiving the inheritance. Those who don’t finish a degree would get a lesser amount or even nothing at all. An incentive trust could also be used to encourage heirs to travel, with funds set aside by the trusts lawyer that can be used only for this purpose. Another popular choice is to match the heir’s salary dollar for dollar or even to give more to those who choose to go into lower-paying but socially valuable jobs.
Incentive trusts are not without critics, and wills and trusts lawyers in Grand Rapids do hear about some of the downsides of tying performance to a payout. There have actually been cases of some individuals choosing to use their estates to influence future generations to live according to the decedent’s beliefs…even going so far as to insist on a certain religion or that a child/grandchild not marry outside of his or her race! (Both of these examples are extremes that are not enforceable in Michigan). Critics complain that sometimes the trusts are too stringent and don’t allow for contingencies or changed circumstances. For that reason, some Grand Rapids clients have found ways to give the trustees a bit more discretion or to give the beneficiary the right to terminate an overbearing trustee. The person creating the trust makes their wishes known but trusts the trustees to use their best judgment.
When dispersal of an incentive trust will be dependent upon specific conditions, wills and trusts lawyers strongly advise clients to draft them carefully with clear language that defines each aspect of the conditions. For example, if the trust will match a beneficiary’s salary, is that before or after taxes are paid? Is a two-year degree at a technical school an acceptable alternative to a four-year degree at a university? What kind of proof needs to be provided to the trust to show that the conditions are being met?
By considering both the pros and cons of this kind of trust, you can determine how best to direct your wills and trusts lawyer when it comes time to develop the right estate plan for you.
If you would like to speak with a professional Grand Rapids wills and trusts lawyer, please contact Eyestone Law Offices at 800.667.5291 to schedule a free initial consultation today! We provide services throughout West Michigan and have three offices conveniently located in downtown Grandville and Muskegon, and another in Grand Rapids near Woodland Mall.