A pot trust is a method to hold assets in continuing trust for a group of children until the youngest child reaches a specified age at which time the pot trust typically divides into equal shares for all of the children and is distributed.
Why would I want a pot trust?
The pot trust allows the trustee to provide varying degrees of help to the beneficiaries based upon need. It is an attempt to approximate as nearly as possible what the parents would do if they were still living. The trustee may spend more funds for one child than another. Equality does not necessarily mean fairness; some of your children may have already reached adulthood, and are financially stable. While you still might have a minor who needs financial assistance to make it to adulthood.
What are some disadvantages of a pot trust?
One disadvantage is the trustee deciding what is fair when spending money for a specific child’s needs. Another is that the older children who are already past say the age of 18 (or at the point in which they are considered adults) cannot cash out on the trust until the youngest child reaches adulthood. Finally, the trust may run out of money before final distribution.
Parents don’t intend to die early, but sometimes they do. The pot trust is a way for a parent to delegate decision making to a trustee for the benefit of their children. The trustee can provide the same level of support to young children that older children enjoyed which may result in a fair distribution.
Thomas J. Bayles has been providing advice in the areas of trusts, wills, probate and tax planning in the St. George market for over 20 years. Please visit www.jensenbayles.com or call 435-674-9718 and ask for Thomas J. Bayles. The information in this article is for educational purposes and is not intended to be legal advice.