While we may have different ideas about what we want to happen after our death, there is a fundamental connection that unites us all – we all cherish our children’s future, and we are all mortal, as President John F. Kennedy once said. As such, most of us strive to provide for our families and leave them better off than we were. However, it’s important to note that additional financial resources may not always improve our children’s lives. Giving children more money can sometimes make them less productive and less happy.
In the documentary Born Rich, Johnson & Johnson heir Jamie Johnson interviews young adult offspring of the ultra-wealthy, including Ivanka Trump, Georgina Bloomberg, and S.I. Newhouse IV. The film explores how inheriting generational wealth has shaped their lives, with some interviewees confessing to drug abuse, feeling offended when asked what they do for a living, and even mocking the idea of giving money to the homeless. However, this issue is not exclusive to the ultra-wealthy. How do we help our children without hindering their development and sense of accomplishment?
Enter the Family Incentive Trust. With this type of trust, you can leave assets for your children’s needs but require them to earn money for what they want. A Family Incentive Trust can be highly flexible, rewarding children with distributions upon achieving specific accomplishments, such as obtaining a college or graduate degree or maintaining a minimum grade point average in school. Such a trust can match the child’s income, encouraging productivity. The match can be greater at the low end, encouraging philanthropy or other helping professions, such as teaching. Alternatively, the match can be set for earnings above a certain level, encouraging maximum income generation.
The bottom line is that a Family Incentive Trust can be customized to reflect your family values and goals while still supporting your children. This type of trust can encourage your children to be productive members of society, foster their sense of self-worth, and promote your family’s legacy. If you’re interested in setting up a Family Incentive Trust, seek the guidance of a qualified estate planning attorney who can help tailor the trust to your specific goals, children, values, and circumstances.
Compliments of the McGee Law Firm, Attorney Brandon McGee