POT TRUST Meaning and
Definition
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A pot trust, also known as a common fund trust or a pool trust, is a type of trust that allows multiple beneficiaries to have a share or interest in a collective pool of assets. In a pot trust, the trust assets are combined into a single fund, and the income or principal generated from the fund is distributed among the beneficiaries according to predetermined rules.
The primary characteristic of a pot trust is that the beneficiaries do not have separate or individualized portions of the trust fund, but rather they possess a collective interest in the entire pool. The trust document typically outlines how the income or principal is allocated among the beneficiaries, such as a specific formula or a discretionary allocation by the trustee.
Pot trusts are commonly used in estate planning to provide for the needs of different beneficiaries, such as children from a previous marriage or a blended family situation. It allows the trustee to manage a single pool of assets and make distributions based on individual circumstances or specific needs.
By utilizing a pot trust, the trust creator can ensure fairness and flexibility in the distribution of assets among beneficiaries, even in situations where the needs and financial circumstances of the beneficiaries vary. It offers a mechanism for centralizing control and administration, while accommodating the unique needs and circumstances of each beneficiary.
Common Misspellings for POT TRUST
- oot trust
- lot trust
- -ot trust
- 0ot trust
- pit trust
- pkt trust
- plt trust
- ppt trust
- p0t trust
- p9t trust
- por trust
- pof trust
- pog trust
- poy trust
- po6 trust
- po5 trust
- pot rrust
- pot frust
- pot grust
- pot yrust
Etymology of POT TRUST
The term "pot trust" does not have a direct etymology. However, we can break it down by looking at the individual words:
1. Pot: In this context, "pot" refers to a common term used in law and finance that represents a collective pool or fund. It originates from the Old English word "pott", which means a container, particularly one used for cooking or storing liquids.
2. Trust: The word "trust" comes from the Old Norse word "traust", which means reliance or confidence. It evolved through Middle English and Old French to become the term we now use for a legal arrangement where an individual, called a trustee, holds and manages assets on behalf of another person or a group of beneficiaries.
When combined, "pot trust" refers to a specific type of trust that involves pooling assets and distributing income or principal to multiple beneficiaries, often based on a predetermined formula or criteria.
