Common Trust Planning for Your Minor Beneficiaries

As parents, we strive to ensure that each of our children feels equally valued. This sentiment often translates into dividing assets and property evenly among children in an estate plan. However, while equal division may seem fair, it doesn’t always reflect the reality that children’s needs vary. Life’s unpredictable circumstances often mean that one child may require more financial support than another at different times.

If something were to happen to you, simply dividing your assets equally among minor children might not be the best way to meet their unique needs. For instance, one child could require more funds than another for education, medical expenses, or other necessities. Instead of dividing assets strictly equally, you may want to consider using a common trust(also known as a pot trust), which gives your trustee the flexibility to manage and distribute funds based on your children's needs.

Why Choose a Common Trust?

Most parents don’t track how much they spend on each child. You provide for each child based on what they need in the moment, even though that may not be an equal amount. This same approach can be carried into your estate plan through a common trust.

A common trust allows you to allocate funds to your children in a way that mirrors how you currently provide for them—by prioritizing needs over strict equality. By doing so, you’re creating an estate plan that’s fair rather than purely equal, ensuring that your children’s differing needs are met as they grow up, even if you aren’t there to manage it yourself.

How Does a Common Trust Work?

Setting up a common trust for your children is straightforward and provides flexibility in how your assets are distributed. Here’s how it works:

• You establish a trust and designate your children as beneficiaries.
• A trustee, whom you choose, manages the trust and distributes funds as needed to support your children’s expenses.
• The trust continues until the youngest child reaches a specified age or milestone, such as turning eighteen, twenty-one, or completing college.
• Once the trust terminates, any remaining assets are divided equally among the children, with distributions possibly being made outright or at staggered intervals depending on their maturity or milestones they achieve.

Additionally, older children can receive advances from the trust for significant life expenses, like buying a home or starting a business. These advances would then be deducted from their final share of the trust’s assets. This option provides flexibility for older children without disadvantaging younger ones.

Considerations for Setting Up a Common Trust

When establishing a common trust, it’s important to outline criteria for how you’d like your trustee to distribute funds. For example, you may want to guide the trustee to consider certain expenses, such as education, healthcare, and other essential costs, ensuring that funds are used in a way that reflects your values and intentions.

While you don’t have to set an age at which the trust ends, you can choose to tie the trust’s termination to milestones like your youngest child graduating from college. Keep in mind that life events may not unfold as planned—some children may delay education, take a break from school, or pursue paths that extend beyond typical timelines. Setting an age limit, such as twenty-three, in conjunction with a milestone can provide more reliable closure for the trust.

Advantages and Potential Drawbacks of a Common Trust

A common trust offers flexibility, allowing your trustee to make decisions much like you would, tailoring distributions to each child’s needs. However, this flexibility also places a significant responsibility on the trustee, as they will need to balance family dynamics and your children's varying interests. Choosing the right trustee is critical.

From a fairness perspective, a common trust allows for need-based distributions, which may feel like the most responsible way to manage your assets for your children. However, older children may become frustrated with having to wait for their share, especially if the younger ones require more financial support. There’s also the risk that by the time the trust ends, there may be little left to distribute if the younger children have exhausted much of the funds.

If your children are close in age, a common trust can be an effective and thoughtful approach. However, if your children vary greatly in age or have different needs, dividing your estate into individual trusts for each child may provide a better solution.



Learn More About Common Trusts and Estate Planning

A common trust is just one of many tools available to help you provide for your children’s future. To explore whether a common trust is the right option for your family, or to learn about other estate planning strategies, contact our office to schedule a consultation.