What Is a Common-Pot Trust — And Is It Right for Your Family?

When planning to leave an inheritance, parents often face a big question: how should assets be divided among their children?

Let’s say a mother has $3 million she wants to leave to her three children. She has two main options:

• Split the money upfront into individual shares
• Place the full amount into a single, shared common-pot trust

Each approach has its pros and cons — and the best choice depends on your family’s goals, values, and needs.

Option 1: Separate Shares

In this setup, the $3 million is divided into three equal parts: $1 million per child. Each child’s inheritance is separately managed and spent.

Example:
Joe chooses a private school that costs $300,000. His individual trust drops to $700,000. Jane, who attends public school and spends very little, may retain nearly her full $1 million.

✅ Advantages:

• Clarity and control: Each child knows exactly what’s theirs.
• Financial independence: One child’s spending doesn’t affect the others.

⚠️ Drawback:

• Uneven support: A child with greater needs — for medical care, education, etc. — may run out of funds, even if siblings have more remaining.

Option 2: The Common-Pot Trust

Instead of dividing the money upfront, the mother places the full $3 million into one trust for the benefit of all three children. Funds are used collectively while the children are minors.

Example:
Joe attends a private school that costs $300,000. The trust pays for it, leaving $2.7 million. When all three children reach a set milestone (e.g., age 25 or finishing college), the remaining funds are split equally — $900,000 each, regardless of earlier expenses.

Advantages of a Common-Pot Trust

1. Flexibility in Supporting Beneficiaries

Funds can be allocated based on actual need — education, healthcare, therapy, or other support.

2. Cost-Effective Administration

Managing one trust is simpler and less expensive than handling three separate trusts. One tax return. One investment plan. One set of documents.

3. Promotes Shared Family Values

A pooled trust encourages unity, shared goals, and mutual support among siblings.

Disadvantages of a Common-Pot Trust

1. Potential for Unequal Distributions

Children who receive more support earlier may walk away with less later. This can create resentment if not clearly explained.

2. Trustee Challenges

The trustee must make judgment calls about what’s fair or necessary — which can lead to disputes among siblings.

3. No Guaranteed Shares

Unlike fixed-percentage trusts, beneficiaries are not guaranteed a set amount. Misunderstandings can arise if expectations aren’t managed.

4. Inflexible Termination Events

Many pot trusts end when the youngest child reaches a certain age. This might not line up with the needs of older children who may require funds sooner.

Is a Common-Pot Trust Right for Your Family?

A common-pot trust is ideal for parents who want to treat their children equally in the end, while allowing for different needs along the way. It works best when:

• Children are still young
• Parents are comfortable with flexibility
• There’s trust in a responsible, impartial trustee

If your family prefers more structure or financial independence between children, separate trusts may offer greater clarity and peace of mind.

Final Thoughts

There’s no one-size-fits-all solution in estate planning. The best structure depends on:

• Your family’s financial situation
• The ages and needs of your children
• Your values and long-term goals

Ready to Explore Your Options?

If you’re thinking about creating a Common-Pot Trust — or want help designing a plan that protects your family’s future — speak with an experienced estate planning attorney.