USING INCENTIVE CLAUSES TO INFLUENCE BEHAVIOR

1 USING INCENTIVE CLAUSES . TO INFLUENCE BEHAVIOR . BARBARA McCOMAS ANDERSON. ATTORNEY AT LAW. Box 181147. Dallas, Texas 75218. ADVANCED DRAFTING: ESTATE PLANNING. & PROBATE COURSE. October 26-27, 2000. Houston, Texas CHAPTER 16-A. Table of Contents TRUST ME, BABY: THE HOUSE, THE MONEY, IT'LL ALL BE YOURS;. THERE'S JUST ONE PARENTS FIND NEW WAYS TO KEEP. TABS ON HEIRS: 'FAMILY INCENTIVE PLANS' BONUS FOR AN AT-HOME MOM. An Article by Monica Langley Staff Reporter of The Wall Street Journal Wednesday, November 17, 1999.

2 SENATOR LIEBERMAN FACED DIPLOMATIC TEST AS EXECUTOR OF WILL. DISINHERITING COUSINS. From an article by Phil Kuntz and Bob Davis Staff Reporters of the Wall Street Journal USING INCENTIVE CLAUSES TO INFLUENCE BEHAVIOR . Barbara McComas Anderson I. SCOPE .. 1. II. DO AS I SAY, NOT AS I DO .. 1. III. WHAT TO ENCOURAGE? .. 2. A. Education.. 2. B. Self-sufficiency.. 3. C. Worthy Character/Contributions to Society.. 3. D. Preserving Family Values and Beliefs.. 3. IV. WHAT TO DISCOURAGE? .. 4. A. Self-destructive BEHAVIOR .

3 4. B. Profligate lifestyles.. 4. V. DOs AND DON'Ts FOR DRAFTING INCENTIVE CLAUSES .. 4. A. DO ASK WHY? .. 4. B. DO ASK WHAT? .. 4. C. DO ASK TO WHOM THE INCENTIVE WILL APPLY? .. 5. D. DO ENCOURAGE FLEXIBILITY & DISCOURAGE CONTROL FROM. BEYOND THE GRAVE.. 5. E. DO ENCOURAGE REWARDS & DISCOURAGE PUNISHMENT.. 5. F. DO URGE FINANCIAL REASONABLENESS.. 5. G. TEST THE CLAUSE !!!! .. 5. VI. AN ALTERNATIVE TO USING INCENTIVE CLAUSES .. 6. VII. SAMPLE INCENTIVE CLAUSES .. 6. i ii PROMOTING EDUCATION .. 7. CLAUSE NO.

4 I.. 7. CLAUSE NO. II.. 7. CLAUSE NO. III.. 7. CLAUSE NO. IV.. 8. CLAUSE NO. V.. 8. CLAUSE NO. VI.. 9. MATCHING EARNED INCOME .. 9. CLAUSE NO. 7.. 9. CLAUSE NO. 8.. 10. CLAUSE NO. 9.. 10. CLAUSE NO. 10.. 11. CLAUSE NO. 11.. 12. CLAUSE NO. 12.. 12. CLAUSE NO. 13.. 12. CLAUSE NO. 14.. 12. WORTHY CHARACTER/CONTRIBUTIONS TO SOCIETY .. 13. CLAUSE NO. 15.. 13. CLAUSE NO. 16.. 13. CLAUSE NO. 17.. 13. ENCOURAGING .. 14. CLAUSE NO. 18.. 14. DISCOURAGING CERTAIN FAMILY RELATIONS .. 14. CLAUSE NO. 19.. 14. ENCOURAGE (?)

5 MARITAL HARMONY .. 15. CLAUSE NO. 20.. 15. CLAUSE NO. 21.. 15. DETER SUBSTANCE ABUSE .. 15. CLAUSE NO. 22.. 15. COMPREHENSIVE INCENTIVE TRUST PROVISION .. 17. 1. Income and Principal .. 17. 2. Withdrawals After Certain Ages .. 17. iii TRUST ME, BABY: THE HOUSE, THE MONEY, IT'LL ALL BE YOURS;. THERE'S JUST ONE RICH PARENTS FIND NEW WAYS TO KEEP TABS ON HEIRS: 'FAMILY INCENTIVE PLANS'. BONUS FOR AN AT-HOME MOM. An Article by Monica Langley Staff Reporter of The Wall Street Journal Wednesday, November 17, 1999.

6 Straight from a win for the Atlanta Braves this fall, tests, but reward charitable work or participation in star pitcher Tom Glavine is talking to his lawyer family foundations. about how and when his two children will inherit his wealth. With an $8 million annual salary, the "The desire to mentor after death is creating a 33-year-old Mr. Glavine wants to set up a trust whole new industry of trust babies," Mr. Owens that provides for his children -- but on his terms. says. "But these trusts have powerful strings attached.

7 ". "Obviously I'm concerned about giving my children that kind of wealth," says Mr. Glavine, Some billionaires such as Warren Buffett and Bill who played in this year's World Series. "I don't Gates in recent years have endorsed the idea of want my kids to feel like they don't have to do leaving a relatively paltry amount to offspring so anything in life." His solution: a "family INCENTIVE they'll have the drive to make something of trust" that provides them with more money if they themselves. This new theory of INCENTIVE planning act in ways he approves.

8 Takes a different approach: Go ahead and give them the money -- as long as they play by your To make sure his children work -- "I wasn't born rules. with a silver spoon in my mouth," Mr. Glavine says -- he'll match their earned income up to Of course, wealthy parents through the years $100,000. And though he vows "I'm not going to have attached conditions to the passing of their make my son play baseball," he is thinking about fortunes. But what's new in the INCENTIVE making extra money available to help his kids approach is the wide-ranging and highly specific engage in sports.

9 Nature of the parental provisos. Indeed, parents are often picking incentives that correlate to When four-year-old Amber tells her father she strikingly idiosyncratic concerns. "The only limit is wants to be an "animal doctor for lions, tigers and the imagination," says Renno Peterson, an baby giraffes," Mr. Glavine has his attorney, John attorney in Sarasota, Fla. "You can tailor it to the J. Scroggin, add another INCENTIVE : $200,000 to individual. One client whose son has dramatic set up a veterinary practice or any other business, anxiety attacks," he says, arranged for higher trust as long as she has done well in school.

10 Allotments "if he's in treatment." Another man whose brother was killed in a car crash instructed But when Amber one day has children of her own, Mr. Scroggin to include in his children's trust a her father wants to offer a different INCENTIVE . "My $10,000 payment for each year they don't have a mom was there for me every day when I got off driving violation. the bus," the pitcher recalls. "There's great value in a mom staying home. I want Amber to be there Most of those interested in the INCENTIVE trusts for her kids.