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Creating an incentives trust

| Aug 24, 2018 | Trusts |

When you have children or grandchildren, you will know that it can be challenging to encourage them to make wise life choices. Delaying gratification can be rewarding and pay off handsomely in the future, but younger people can find it difficult to delay gratification unaided.

This is why many parents and grandparents create incentive trusts that can help their loved ones make wise choices in the future. These trusts encourage financial behaviors or disincentivize them from exercising problematic habits.

How incentive trusts are created in the state of Arizona

Incentive trusts are becoming increasingly popular, but are not without controversy. Some heirs may feel that the trust grantor is attempting to exert control over their lives from beyond the grave.

They can be set up in the same way that other trusts are. However, the trustee follows the philosophy of the trust’s grantor as well as the schedule for disbursements of funds. The trust can also include a statement that explains the reasons why it is set up in such a way, and its purpose.

For example, a person may want to ensure that their beneficiary is self-sufficient and able to support themselves financially before inheriting any of the money. This might be initiated by allowing bonuses from the trust to be allocated when the beneficiary earns certain amounts from their own personal efforts.

If you are considering setting up an incentives trust in the state of Arizona for your children or grandchildren, it is important to spend time working out all of the details of exactly how the trust will work.

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