This type of trust can best be utilized if all of a person's assets will be left to their children.
A family pot trust is a discretionary trust (also called a sprinkling trust) and the trustee has considerable responsibility. The trustee is permitted to distribute the assets according to the needs of the children.
The trustee has greatly increased discretion and may not be following a prescribed set of guidelines. The assets of such a trust are distributed based on need.
The distributions may not necessarily be equal; are not distributed on any set schedule and are not specified in detail by the trust.
This makes a family pot trust extremely flexible, but not necessarily "fair' to all offspring.
The trust exists, usually for two or more children, and ends, usually, when the youngest child reaches a certain age or there is only one surviving child.
In general, The other children in the trust need to wait until the youngest child reaches the age of maturity before the remaining proceeds of the trust are distributed.
Clearly, a family pot trust requires some serious consideration, and may not be appropriate when there is a large age difference in the children. A family pot trust is often set up when the children are minors.
Such a discretionary trust may not be appropriate when one child is a special needs child and would require substantially more assets from the trust than the other children.
There are other considerations to a family pot trust, including the selection of a trustee (who in some cases can be seen as taking on a parental role in determining how funds are distributed) and tax considerations.
Like any legal document, the creation of a family pot trust requires an experienced trust attorney to draft such a document and explain the benefits and drawbacks in a particular family situation..
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