What is a Pot Trust?
A pot trust, also called a “pot trust fund”, is a legal entity that is set up to protect assets and help manage financial responsibilities for a designated group of people. The trust can be established and administered by a financial institution or other legal authority, or an individual may create a pot trust themselves.
Key Features of a Pot Trust:
- Asset protection: A pot trust helps to protect assets from creditors by placing them in a legally designated trust. It also provides protection from legal claims or financial issues that could arise when gifting or transferring assets.
- Tax advantages: In some cases, establishing a pot trust can help reduce tax liability and provide more accurate record keeping of income and expenses.
- Professional management: Professional-level management of the trust’s investments and assets helps to maximize returns and increase the value of the trust.
- Flexibility: A pot trust is a flexible and customizable way to provide for heirs or beneficiaries of an estate, as one can tailor the terms and conditions to the specific needs of the individual.
Types of Pot Trusts:
- Discretionary Pot Trust: A discretionary pot trust can provide the maximum flexibility for distributing assets. This type of trust offers the trustee discretion in how the assets are allocated.
- Protective Pot Trust: A protective pot trust is designed to provide protection from creditors, court judgments, or creditors attempting to attach assets.
- Generation-Skipping Pot Trust: Generation-skipping pot trusts are designed to keep assets in trust for multiple generations of benefactors, benefitting a variety of descendants. This type of trust typically has a long time-span and many provisions.
A pot trust can be a useful tool for ensuring that one’s assets are managed responsibly and distributed according to their wishes. As with any legal entity, it is important to consider all options carefully and consult a qualified attorney before establishing a pot trust.
