You have two options if you want to leave assets to several beneficiaries in a trust. You can either set up a pot trust or create separate shares for each heir. Here’s the difference between the two to help you decide which to choose.

What’s a Pot Trust?

A pot trust places all the funds for the beneficiaries in a single entity. Once the youngest heir reaches the required milestone, the assets are divided according to the trustee’s discretion. Delaying the distribution of property until all beneficiaries have reached a certain point in life can protect everyone's financial interests in the long run. For example, if there’s a significant age gap between your children, you may not want to distribute their inheritances until they’ve all reached adulthood and become self-sufficient.

In this scenario, a pot trust would allow you to continue providing for the younger kids while they finished school and established themselves. Once they’ve reached the predetermined milestone, the trust’s remaining balance would be divided equitably among the beneficiaries.

What Are Separate Shares Trusts?

Separate shares trusts release funds separately. A beneficiary of a separate shares trust is entitled to their inheritance as soon as they reach their designated milestone. As a result, older beneficiaries won't have to wait for their younger siblings to mature.

Separate shares trusts are appealing because they prevent the appearance of favoritism. While pot trusts distribute assets equitably, they don't necessarily do so evenly, and the heirs who receive significantly less than the others may feel slighted.

Whether you want to set up a pot trust or create a separate fund for each beneficiary, turn to Wills and Trusts Hawaii in Honolulu. This estate planning firm helps clients get their affairs in order, from coordinating asset distribution and long-term care planning to bypassing probate and reducing state taxes. To request a consultation, send a message online or call (808) 792-8777.