Family pot trusts (also called discretionary or sprinkling trusts) are a type of trust where the trustee is allowed to disperse funds according to the needs of the beneficiaries. Family pot trusts are created by parents for their children, usually in case something were to happen to them. Unlike many trusts where the trustee must follow strict instructions from the creator of the trust, family pot trusts allow parents to grant almost unlimited flexibility for the trustee to give funds to their children as needed, sometimes only to one beneficiary. Parents may want their children to receive different amounts from the trust as expenses arise such as medical bills or college tuition. Family pot trusts have great advantages for flexibly allocating trust assets, but they come with the disadvantage of possibly allowing a trustee to manage the trust against the interests of the trust creator. Given the level of discretion given to the trustee, it is extremely important to choose the right trustee and define the intentions of the parents. Also, the trust typically does not end until the youngest child reaches the age of 18 or another age set by the trust. So, older children who might need the money in the trust might not be able to access it until late in life.
[Last updated in January of 2022 by the Wex Definitions Team]
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