Big Firm Quality. Small Firm Feel.
View Our Practice Areas

6 questions to ask when drafting an employment incentive trust

Incentive trusts are used to give heirs goals and to make sure they don't just live off of a large inheritance without doing anything for the rest of their lives. The wealthy often worry that their children won't be productive after they pass away, so they use trusts that only pass on their assets when certain goals are met.

These goals vary considerably from one case to the next, but a lot of them focus on employment. As long as the person has a good, productive career, the trust will keep paying. This gives the person a nice annual boost in income without leading to premature retirement.

However, the trust has to address all potential issues to make sure it works properly. Six questions to ask when drafting it include:

  1. What if the heir stays in college or goes back to school? You don't want the trust to automatically cut off because your child opts for an education.
  2. What if the heir decides to become a stay-at-home parent and drops out of the workforce?
  3. What if the heir gets a serious illness or suffers an injury, leading to disability?
  4. What if the heir does not work in order to care for an aging family member or another family member with a disability?
  5. What if the heir puts in significant time as a volunteer for a cause he or she is passionate about, even though it doesn't pay a salary?
  6. What if the economy crashes, the heir loses his or her job, and finding a new job proves impossible?

Now, a trust can be written to address each of these issues in turn, but this just shows why it's so important to understand the legal process and to carefully consider all of your options.

Source: The Balance, "Do Incentive Trusts Work?," Patti Spencer, accessed Feb. 15, 2018

No Comments

Leave a comment
Comment Information
Email Us For A Response

Contact The Firm

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Torrance Office 21515 Hawthorne Boulevard, Suite 450 Torrance, CA 90503 Phone: 310-540-2000 Fax: 310-540-6609 Torrance Law Office Map

Santa Clara Office 2880 Lakeside Drive, Suite 135 Santa Clara, CA 95054 Map & Directions