One variation of trusts which is creating a lot of excitement with parents is called The Incentive Trust.
Traditionally, a trust would, at most, specify the age at which a beneficiary would receive money. However, often the unintended result would be, in the absence of your guidance, the creation of brats or unproductive adults. In general, parents do not want this. Parents generally want their kids to be successful, educated, happy, and well adjusted. Parents do not want their kids to lack motivation, ambition, or fall prey to bad habits. Even after they are gone.
Although it is not as bad as leaving your children nothing, giving young kids too much money all at once could actually create a DISINCENTIVE to work, budget, have goals, and mature. Further, without a trust in place your child would receive all of the money from you and your life insurance at one time. And if they are minors at the time of your death, they would receive this money at the ripe old age of 18. This single payment would be quickly, if not unwisely, spent and would be the last influence they would have from you for the rest of their long lives – no matter what happens to them down the road.
This is why Incentive Trusts are becoming increasingly popular. They are designed to do what you would do if you were still here: encourage your child to continue reaching goals as well as discourage your child from engaging in bad or illegal behavior. How it works is that upon the happening of certain specified events or accomplishments, a distribution from the trust is triggered. It allows a parent to structure the timing and conditioning of distributions of funds to their child to encourage good grades, graduations, entrepreneurship, entry into the family business, home ownership, as well as avoidance of drugs, alcohol, and other bad elements.
Within an Incentive Trust, you could also have a Matching provision, in that any money your child earned from employment would be matched by a distribution from the trust. This would encourage them to gain employment and keep a job.
The variations are endless, I have a client who wanted to encourage her kids to marry so she provided for a $5,000.00 wedding gift to be used however her kids chose. I also had a client who wanted to encourage her children to see the world so she provided for a distribution for trips her kids might take out of state and an even larger distribution for international trips.
Incentive Trusts are especially helpful to parents of young children, parents who are a little older, or parents who sense their children may be ever so slightly immature or financially irresponsible.