Good parenting is about loving and supporting your children. That does not always mean spending the same resources for each child. An equal split of funds among your children might not serve their best interests. When making an estate plan, you should consider a more flexible arrangement.
Whether based on age, health, interests, or other factors, your children are unlikely to have the same expenses. Dividing your assets equally is not your only option. A common trust, sometimes called a pot trust, can resolve this issue.
Common trusts allow you to leave specific instructions with a trustee of your choice. The trustee will use the funds of trust on behalf of the beneficiaries as per your wishes.
Fair Is Not Always Balanced
If one of your children wants to sing in the choir, and another wants to play the bassoon, the costs associated will be different. You likely want to encourage their interests, despite the unequal expense.
Another major expense is education. What if one of your children gets into an expensive – but elite – college? Would you want money to stand in the way of that opportunity? A trustee can make that call if you are not there to make it yourself.
The Basics of a Common Trust
There are several steps in creating and executing a common trust for your children, including:
- Identifying which assets should be in the trust
- Choosing someone you can rely on to manage those assets for your children as trustee
- Listing your children as beneficiaries
- Creating a trust agreement directing the trustee to make distributions to your children according to your directions
- Choosing the conditions that will end the trust which typically means choosing an age or milestone such as graduation
- Deciding on the right way to distribute any funds left in the trust when it terminates
There are many possibilities when it comes to creating a trust. There is a delicate balance to be struck to protect family harmony, while still providing for the unique needs of your children.
Will your oldest child have to wait for the youngest to graduate, or reach a certain age before getting a full share? Is it fair for one child to receive that share at 21 while another waits until age 28? Even if it isn’t “fair,” is it still “the right thing to do”?
Will the trust account for the varying levels of frugality or responsibility displayed by your children? If one child is bad with money, is that a good reason to give that child more? There are many things to consider.
A Flexible Arrangement
The best person to decide how to handle the unpredictable needs and wishes of your children is you. If tragedy strikes and you are not able to do it yourself, you might prefer a plan with the flexibility to account for the messiness of life.
A common trust can help you and your family deal with tricky issues. If one of your children has special needs that will require more financial assistance, a common trust can provide for that.
If your children are far apart in ages, they will likely need very different levels of financial support. If you are concerned about one or more of your children’s ability to make smart financial decisions upon receiving a large sum of money, a common trust could be the answer.
Extensive Experience in California Trust Law
If you are considering a common trust as part of your estate plan, you need experienced legal help. Attorney Janet L. Brewer has helped countless families with their estate planning needs over more than two decades. To discuss your needs, reach out to our team today.
