Incentive-Based Trusts In The Modern Era

Between now and 2049, an estimated $51 trillion in wealth will be transferred between the baby boomer generation and their children, grandchildren, favored individuals, and charities of choice. This intergenerational wealth is absolutely staggering, especially in light of how many states decline to administer an estate tax and the fact that the federal marker for triggering any estate tax obligations is somewhere around the $22 million mark.

Historically, to ensure that one’s intended beneficiaries not lay to waste decades of intelligent wealth-building, the funders of various trusts would create age-based distribution mechanisms for disbursement. If you were putting $3 million in a trust for two children, you might only provide that they receive $100,000 at the age of 25, $250,000 at the age of 30, $500,000 at age 35, until the funds were extinguished.

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