Idaho Law Blog
Just recently I was reminded by a client about the need for creating incentives through estate planning for children who will survive their parents. My client came to me with some very sad stories concerning their children. Apparently the children had been noted on during their lifetimes by well-meaning parents and had not developed any Ambitions on their own, simply because they were able to rely on their parents for financial help. This client specifically asked about ways that estate planning could be used to help incentivize the children for their lives. Real estate planning provides a number of options and providing gifts to children, I have found that there are really 3 ways to create incentives for your children through your estate planning.
- OPPORTUNITY FUNDING
Opportunity funding allows your personal representative and/or trustee to actually purchase or buy an opportunity for your child rather than giving them a gift of cash or other assets directly. What this simply means is your trustee may actually go and purchase a business opportunity for your child. Through your estate planning you can provide a good deal of discretion for your trustee on the types of business opportunities that can be purchased for a specific child. The incentive for your child is that the more successful the business is the more assets and money that are ultimately provided to the child.
This type of funding does create an incentive to succeed. However, the weakness of this type of funding is that you are essentially controlling your child from the grave with regards to the profession or work options your child has to choose from. Some clients like this option, but some clients reject it because they feel that they are being too controlling with their children.
- MILESTONE FUNDING
Another option for providing it and send it to your child is through what is known as Milestone funding. This type of funding creates or sets up specific milestones that your child can work to achieve. When the milestone is accomplished, a distribution would be made directly to that child.
For example, many parents create milestone funding options for children to give them an incentive to complete their college education. A parent may provide in their estate planning documents that when their child obtains a college degree a distribution will be made directly to that child. Other Milestones that parents choose from include marriage, going on a mission, starting a business, and or saving a certain amount of money themselves. when any of these milestones are met, the parents estate with that make a distribution directly to the child in whatever amounts the parent specifies.
- STAGGERED FUNDING
The third option that exist for parents who want to provide incentives to their children is what is known as staggered funding. Simply put, staggered funding is when you choose specific ages for your child when a distribution from your estate will be made. For example, I have had clients who will create a 1/3 staggered funding option where the child will receive one-third of the estate distribution at the ages of 28, 38, and 48.
The thinking behind staggered funding is that your child is on their own for a certain period of their life, and must learn to provide for themselves during this time period when a child learns this skill, they are not dependent upon the distribution from the estate in order to be productive during their lives. Rather, the distributions from the estate will simply be a bonus that will be given to them at certain ages during their life that they can then use with the skills they have already obtained.
The point of this blog is simply to show that there are many options that exist with regards to providing incentives for your children through your estate planning. If you have questions about how to make distributions to your children in a way that provides incentives for them, we can help. Call us toll free at 877-232-6101 or 208-232-6101 for a consultation with Lane Erickson and the Racine Olson team of Estate Planning attorneys in Idaho. You can also email Lane Erickson directly at lve@racinelaw.net. We will answer your Idaho Estate Planning questions and will help you solve your Idaho Estate Planning problems.
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