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How can you ensure that your heir keeps working?

On Behalf of | Apr 13, 2022 | Estate Planning

You know that the inheritance you’re going to leave to your child is enough that they wouldn’t technically have to work again if they didn’t want to. They could have a standard of living that is probably higher than what’s enjoyed by most people in the United States, all because of that inheritance.

However, you don’t want them to forget the value of hard work. You don’t want them to quit their career or stop doing the things that they’re good at. How are you supposed to pass your money on to your heir in a way that ensures that they keep working?

Don’t give them everything

Of course, the first option that some wealthy individuals have chosen is to not give everything to their heirs. You could leave them some money to show that you care about them and you want them to be able to take a vacation or even buy a new family home. But you don’t have to leave them so much that they don’t have to work ever again. Instead, you could set money aside for charity or put it in a trust for your grandchildren to go to college someday.

Use an incentive trust

Another option is to use an incentive trust. This type of trust only pays out when the incentives are met.

For instance, you could create a trust that makes one annual payment to your heir. The total of that payment is not set in stone. Instead, they have to show the trustee how much they earned that year, and then the trust pays them out the same amount.

Not only does this mean that they won’t stop working, as they would then get nothing at all from the trust, but it also prompts them to work harder. The more money they are able to earn, the more they get from the trust. They’ll still enjoy this inheritance cuz it essentially doubles their income for nothing extra, but it does make sure that they still have to work in order to have any income at all.

Exploring your actions

The above are just two options that you have to set up your estate plan in a way that fits with your desires and your family’s needs. Be sure to carefully consider all of them at this time.