The wealthy have
always struggled with how to incentivize their children to work hard for
themselves and not just rely on family wealth and an inheritance.
One common concern among wealthy people is that leaving their
wealth to their children may cause them harm. Many fear their children will
stop working for themselves and just spend their parents' money.
There are many examples of wealthy heirs doing just that.
Recently, The Economist's 1843 Magazine looked at how
wealthy people have addressed this dilemma over the centuries in "How
to Make Inheritance an Incentive."
Andrew Carnegie, for example, famously left nothing for his
heirs.
Today, using incentive trusts is a common method.
These trusts only give money to beneficiaries when certain
benchmarks are met, such as getting a college degree and getting a job with
trust payments tied to salary. How well these incentive trusts work, however,
is up for debate.
Oftentimes, they have the unintended consequence of
punishing children for doing things their parents would actually approve. For
example, by giving a child more money from the trust based on how much they earn
might discourage them from taking an easy or part-time job, but the child would
also be discouraged from taking a lower paying public service job.
Incentive trusts can be written in such a way that heirs are
encouraged to do appropriate things, but they need to be flexible.
It can be a good idea to give the trustee some discretion to
make trust disbursements in accordance with conduct the trustee thinks the
parents would have approved. Choosing a qualified trust administrator
is an important process. For more information, please call 800-220-4205 to
speak to a certified estate planning attorney about the best way to consider
the administrator for your family trust. At OC Elder Law, we have the
experience to help you with this important decision. Visit www.OCElderLaw.com for more information.
Reference: 1843 Magazine (Oct. 13, 2016)
"How
to Make Inheritance an Incentive."
No comments:
Post a Comment