Trusts for Children: Pot Trusts v. Separate Trusts

In today's video we look at trusts for children. The two key structures are setting up pot trusts and separate trusts. We look at how they are structured and why you might prefer one over the other.

In Minnesota, a person cannot inherit until they reach the age of 21. That means anything they inherit needs to be placed in a trust until they reach at least that age.

When there are multiple children in a family, the question arises about how the trusts should structured. The first structure is to create separate trusts for each child. Say, for example, you have two children and $200,000 total. You might set aside for each child $100,000 to help raise the children and whatever is left at the age of 21 is directly distributed.

Another approach is to do what is called a joint trust, or “pot trust”. Here, all of the funds are placed in a single trust to be used for raising the children until the age of 21. When the youngest reaches the age of distribution, then the amount in the trust is distributed to the children.