Incentive Trust Provisions
What is it?
Rather than distributing wealth unconditionally, incentive provisions tie distributions to beneficiary achievements or behaviors. These can reward education, employment, entrepreneurship, charitable work, or other values important to the grantor. They can also protect against harmful behaviors by withholding distributions from beneficiaries with addiction or financial irresponsibility.
Why is it important?
Family Fortunes emphasizes that inherited wealth without values destroys families. Incentive provisions transmit your values along with your money. They encourage productive behavior, discourage dependence, and give the trustee flexibility to respond to each beneficiary's circumstances. Well-designed incentives create motivation without punishing beneficiaries for circumstances beyond their control.
Example Language
The Trustee shall consider the following in making discretionary distributions: (a) matching distributions for earned income (e.g., $1 from trust for every $1 earned); (b) funding education at any level; (c) seed capital for business ventures with viable business plans; (d) support for charitable or community service work. The Trustee may reduce or suspend distributions to any beneficiary demonstrating patterns of substance abuse or financial irresponsibility.