So-called “incentive trusts” offer rewards to trust beneficiaries who accomplish certain goals. With such a trust, beneficiaries might receive particular amounts for getting higher education degrees, attaining certain levels of earned income, serving in the community, etc.
For example, you might state that the trustee will distribute to each of your grandchildren a certain percentage (say, 25 percent) of earnings each year, up to $25,000.
Another approach is to leave such distributions to the discretion of the trustee. The trust might indicate what types of activities will be rewarded, then allow the trustee to make appropriate distributions. For this type of arrangement to succeed, it is especially important that you choose a highly-qualified trustee.
The trustee (perhaps a relative, a friend, or a professional advisor) must be able to empathize with your beneficiaries yet make prudent decisions about distributions. Moreover, you should include a plan for trustee succession, in case your first choice becomes unable or unwilling to serve.
