Fairness And Equality: A Pot Trust Can Help With Both

If you have children, or a group of people that you want to plan for in your estate plan, you probably think of leaving your assets to each one individually. But you can also put all of your assets in one place, for all of them. This is called a pot trust, and it has certain unique uses in the word of estate planning.

What is a Pot Trust?

A pot trust puts all your money in one place, and then leaves much of the discretion and decision making over who gets what, to the trustee. There is no requirement that the pot be distributed evenly-in fact, that’s one advantage of the pot trust, that it is clear that the property will not be divided equally, but rather on a need basis.

This makes sense, because in the future, you never know what one child’s needs may be, compared to the other. What if one child ends up with a disability, and needs more support than the other. What if one decides to go to college and the other doesn’t?

Fair But Doesn’t Have to be Equal

Pot trusts may not end up leading to an equal distribution. But they may be much fairer, because often, equal distribution isn’t the fairest distribution because everybody’s life and needs are different. In fact, the more different your beneficiaries are, in age, health, stage in life, or other factors, the better off you may be with a pot trust.

A pot trust also can help you plan for the unexpected; the pot can be used as an emergency fund, there in case one of your beneficiaries finds him or herself in a difficult situation.

Examples of When a Pot Trust Can Help

Pot trusts can also equalize things from life to death. For example, imagine you’ve given one child lots of money in support, because your other child never needed that financial support. If that other child later needs financial support after you are gone that child will not have received the support that other child received.

But that child would get that support through a pot trust.

Imagine you gave one child money to start a new business while you were alive. Wouldn’t you want to provide the same support to your other children, if and when they may want to do the same thing? A pot trust can help—you can fund the other kids’ businesses if they ever start one, but if they don’t, the funds are still there to help all of them in other ways.

The Trustee

You can, of course, leave instructions to the trustee through the trust, to provide parameters on how to distribute the money—the more detailed the instructions the less flexibility the trustee will have.

Because a trust has so much importance in a pot trust, you want to choose a trustee that has a good relationship with you, your family, and your beneficiaries.

Is a pot trust right for you? Call the Torrance will and estate attorneys at Samuel Ford Law today for help create your estate plan.

Sources:

kiplinger.com/retirement/estate-planning/605036/pot-trusts-why-theyre-the-fairest-trust-structure-of-them-all

trustandwill.com/learn/pot-trust