You want to set up a trust to control your life insurance. You know that the irrevocable life insurance trust (ILIT) can help with your estate taxes, and you have a substantial policy to consider. You think a trust is the best way to pass that asset on to your children.
Many parents see their children through rose-colored glasses. They only see the best in them. When it comes to how the children relate to each other, they assume that they'll always get along.
You have never said a word about estate planning to your parents. You suspect they have not done it yet, and you know that they need to, but it feels too awkward to bring it up.
You have not always lived in California. When your own parents passed away, you remember that they had to pay estate taxes in their state, and it really cost them. As you start doing your own estate planning decades later, you wonder if you will need to pay these taxes to California.
You know that you need a will, and you know that it is best not to put off writing it. However, you also feel like you have decades left -- barring an accident or something else unexpected -- before your heirs will need to use that will.
An incentive trust is, in many ways, quite a simple idea. You want to give your heirs an incentive to live a certain way, so you put their inheritance in a trust and they only get it if they follow the rules you set. For most parents and grandparents, they just want the heirs to have a productive life with gainful employment, rather than living off of the money. The incentive, then, can be that they only get the money if they're employed or that the trust pays out the same amount that they earn every year, giving them incentive to work harder and move forward in their career.