En donnant de l’argent à vos enfants, vous pourriez les aider à réaliser leurs rêves, mais aussi faire baisser leur motivation à devenir des adultes indépendants. Pierre Letourneau, planificateur pour les clients à valeur nette élevée à Gestion de patrimoine TD, explique comment vous pouvez utiliser une fiducie d’incitation pour procurer de l’argent à votre famille tout en établissant des conditions pour l’obtention de ces fonds.
I know one tool that's available is an incentive trust.
What is an incentive trust, and why would somebody want to use one?
An incentive trust is a trust that allows for distributions to beneficiaries if certain conditions are met.
And these conditions typically are put in place, are designed to promote positive behavior or even sometimes discourage negative behavior.
Can you give me an example of where you've seen one used recently?
I worked with a couple, a lawyer and a doctor.
They were very successful, had amassed a large amount of wealth.
And they wanted to help their children out.
So they used a trust.
And education was really important for them, so they put a condition in place to allow distributions if their children obtained a university degree.
So the kids got the money if they got the degree, or the grades, or whatever it was that they talked about.
What are some other incentives you've seen put in place to try and model behavior, if you will, with kids?
I've seen incentives related to marriage.
So if a beneficiary was to get married, then they'd be entitled to funds.
Incentives related to career achievements-- matching provisions as well in terms of income.
So they are entitled to a dollar for every dollar that they earn on their own.
Other provisions related to health care.
And I've seen a situation where the beneficiary needed to undergo drug tests to make sure that they weren't taking any illegal drugs to be entitled to some of the funds.
The incentive trust really is a flavor of trust, if you will.
There's a fundamental trust structure which provides benefits as well.
So what are, again, the benefits of the trust beyond the incentive piece?
So it provides for income splitting with the beneficiaries, with the children.
It also provides creditor protection.
So the assets are protected against any of the beneficiaries' creditors.
That often could be former partners if there's been a marital breakdown.
Also, it bypasses probate as well, too.
So it's a good way to transfer assets outside of probate.
The incentive trusts, going back to that again, are they legally binding?
I mean, if a parent or someone puts an incentive into a trust that is unreasonable or something that there's no hope that the child or the beneficiary could get, can they be challenged?
They definitely can.
So there are some limitations.
The conditions, first of all, can't be illegal.
So they can't require illegal activity.
They also need to be clearly defined.
They can be challenged if they're not clear.
And also, they can't be against public policy.
And that's evolving.
As our society evolves, public policy evolves as well too.
So a condition that might be binding today might not be enforceable in the future.
And let me ask you about level of assets.
When does this make sense?
I think for just the trust structure, there would have to be probably at least a million dollars in investable assets for it to make sense, so that the benefits of the trust would outweigh the extra costs of having the trust in place.
Final question for you-- when is this a good idea, and when is it a bad idea?
I mean, you've always kind of heard people who shouldn't try-- if it's a testamentary trust, you shouldn't try to control people from the grave, so to speak.
So when does this work?
When doesn't it?
I think it's really important to know your children and know what will motivate them.
And so if there are clear conditions that you could put in place that will motivate them to achieve or to be very successful, then it makes sense in that situation.
But if you don't really know how to motivate them, this type of structure could backfire and actually lead to them behaving in the opposite way that you intended to.
Pierre, it's a lot to think about.
Thanks so much.
And a reminder-- please talk to your advisor, lawyer, or accountant to figure out what works best for you.