Providing for More than One Child
Having a child is a blessing. Raising them is a loving challenge. But having more than one child is complex. You love all your children equally and want what is best for them. But every child is different. Some are the center of attention, while others are shy. Some children love outdoor adventures, and others talk to their friends for hours on social media. Some are independent, while others need a hand from time to time. One child may be gifted in sports, and you spend time, money, and energy developing that talent. Another might want to be an artist, and another has no idea what to do yet. And the needs of children at various ages are staggeringly different. Imagine a four-year-old in daycare, a ten-year-old in the robotics class, and a seventeen-year-old getting ready for college. You do love them equally- but their needs are different. While you are here, you know in your heart what is best for each of them at the time.
But What Happens When You Are Gone?
But what happens when you pass away? Without proper planning, your assets might be divided equally among your minor children when you pass away. This type of division speaks to their numbers and not their individual needs. So how do you keep financially parenting in a way that's best for them when you are no longer here. A properly set up pot trust, lets you arrange for their individual needs after you are gone. Instead of equally dividing your property among your children, you place it all into a pot trust. And you give your trustee instructions so they will help your children as you would do if you were here.
What is a Pot Trust?
If you have more than one minor child, a pot trust might be an excellent estate planning tool for your family. Sometimes called a common pot trust, all the assets are left in one pool or "common pot" with no specific distribution list. You give instructions and discretionary powers to the trustee on how the funds should be spent on your children to take care of their needs. Flexibility is the fundamental characteristic of family pot trusts. The trustee can distribute based on the children's needs instead of a set amount per child. Assume you create a pot trust and one of your children has a medical emergency. Your trustee can spend the money needed to handle the crisis without being tied to a numeric distribution formula. They can do then what you would do now.
How Does a Pot Trust Work?
Pot trusts are usually established for minor children and terminated when the youngest beneficiary child reaches a certain age. You might set the trust up to terminate when they turn 18, 21, or 25. While the trust is in place, the trustee uses their discretion to decide how the assets will be used to provide for the beneficiaries’ well-being. One child might need braces, while another might have special needs. The trustee can cover those expenses as required. The purpose of the pot trust is to allow the trustee to meet the financial needs of individual children as needed. The assets do not need to be divided equally among the children. When the youngest child reaches the required age, the trust terminates. The remaining assets are distributed among the beneficiaries.
When to Use a Pot Trust
Every child is different, and each family is unique. If you want to ensure that your minor children's needs will be met as they arise, consider a pot trust. You can give clear instructions to a trustee who knows you and your family. You allow them the flexibility to help care for your children as you would. The trustee can pay for basic living expenses and handle unforeseen expenses as they come up. Also, you decide when the trust should terminate and how the remaining assets should be distributed.
Should You Use a Pot Trust?
Trusts are one of the most powerful estate planning tools you can use to ensure your assets are distributed in the future according to your wishes. Let us show you how a pot trust or other trusts might work for you and your family. Although trusts and California trusts and estate law may be complicated, this is all we do. San Diego Legacy Law, PC is a qualified estate planning attorney firm in San Diego, California. We are familiar with all federal and California estate and trust laws. We know how to best help you achieve your estate planning goals, especially how to use trusts to ensure your wishes.
Call today for a free consultation and learn your next best steps.