Trust Distributions

In estate planning, all trusts specify a time when the corpus (principal or body) of the trust must be distributed to the beneficiaries. When planning in advance, and dealing with minor children, it can be difficult to gauge when the children will be mature enough to handle their share of the inheritance. A testator may want to delay the distribution of the corpus to a later date, such as when the children reach age 30 or 35. Some clients prefer to stagger the distribution, using a formula such as one third of the trust at ages 21, 25, and 30. Some clients prefer to give the beneficiary a power of withdrawal that he can have over the property once he reaches a specified age.

Single trust

For clients who have more than one child, a separate trust can be established for each child. A single trust can include all children.

Multiple trusts

Creating multiple trusts, that is a separate trust for each child, adds flexibility, however it increases administration costs. Separate trusts can also be considered unfair to any younger children. Younger children will receive a smaller final distribution when they reach adulthood because the money used to pay expenses in raising them come from the family “pot” of money, because living expenses over a longer period of time will have been charged only to their shares. A way to solve this problem is through the use of a single trust.

Single pot trust

A single trust that is created for more than one child, retains the characteristics of the “pot” of wealth, and is the pot trust or family pot trust. This type of trust remains undivided until the youngest child reaches age 21. At that time, the assets are then divided into equal separate shares for each child. The assets are distributed outright, or held for distribution at a later age.

Some attorneys recommend dividing the corpus of a pot trust into shares sooner rather than later, usually when the oldest child reaches age 18, so that they can pay for their own college costs out of their own share.

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