In my opinion, all trusts need to be incentivized. There is a rare case where the potential inheritor has his shit together in such an extreme that this is not needed. Like the kind of person that practically from birth was frugal and read the Wall St Journal for fun...guilty! But I digress...
So what is an incentive trust? Quite simply it's a trust where you set stipulations in order to make the inheritor still become a worthwhile member of society. We all know the trials and tribulations that trust fund babies must endure...or should I say lack there of? So maybe education is really big in your family. Along with home ownership. Maybe even making sure that your child doesn't have any children until a certain age?
So let's say you draw up a trust that says that 4 tranches will be paid out under the following circumstances.
1. Graduation from an accredited university.
2. Full time employment, at which 100% of the salary will be matched until this second 25% is used up.
3. Up to 25% of the trust can be used for a down payment of their first home.
4. The final amount is paid out after the inheritor has been married one year, two years, three years, etc.
Doesn't that sound better than throwing $500,000 at an 18 year old? Who do you think would turn out better?