What Is A Pot Trust?

August 4, 2010

A pot trust (also referred to as family trust) is a single trust for all of the children in the family that is used in the event that both parents die before the children reach a designated age of maturity. It offers some unique pros and cons for your beneficiaries.

Advantages and Disadvantages of a Pot Trust

An advantage to having a pot trust is that the trustee may be given the flexibility to spend the funds in any way he or she deems fit. That means that little Jimmy could have tuition paid to attend a trade school while Mary's tuition at an accredited university is paid if that’s what the trustee determines is in their best interests. However, if you gave a trustee broad discretion to make these types of decisions, you should be assured that your trustee is someone in whom you can place your confidence to make the decisions as you would desire.

Another consideration is that the trust is set up to operate until the youngest of the children reaches the designated age. Any funds then remaining in the trust would be disbursed equally to all the children. But if there’s a large gap in ages between your children, the older children may be waiting a significant time to receive their portion of the inheritance.

Inheritance Estate Planning Services

Of course a pot trust is only one toll of many to provide an inheritance for your children after you’re gone. To learn more about inheritance estate planning, get in touch with Anderson, Dorn & Rader.

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