How do I set up a trust for my grandchildren?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Jul 15, 2021

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If your grandchildren are minors then they have to have a Trustee who will manage the assets for them and distribute funds to the children’s caretakers for the reasons you specify in the Trust. For example, you might direct that funds will be released to pay for living expenses, education, medical expenses, and other things.
Once the children reach the age of majority in the state where they live, it is legal to have the Trustee release all their share of Trust assets to them, but this might not be a good idea. Your grandchildren may not be capable of managing assets well at 18 and could lose assets that might have helped them later in life. Having too much too soon may also decrease their drive and motivation to pursue education, training, or establishing a career.

It might be a better idea to have the Trustee distribute the assets more slowly. For example, your grandchildren’s assets could be released at 18 only at the Trustee’s discretion, or distribution could be restricted in some way such as for your Beneficiaries to receive 1/3 at age 21, 1/3 at age 25, and an additional 1/3 at 30. This provision would be subject to the discretion of the Trustee to make earlier distributions for things like necessary living expenses, a down payment on a house, education expenses, funds to invest in a business, necessary medical care, and so on. There could also be an automatic acceleration to reward your grandchildren for meeting some objectives you set. For example, they might receive an earlier disbursement for graduating at the top 10% of the class from high school, for getting top grades at college, or for college graduation. You might also want to release more funds when they get married.

If you set up this kind of Trust you will want to choose a Trustee and alternate Trustees who you feel will be sensitive to your grandchildren’s needs and maturity and who will distribute the money as closely as possible to the way you would have done yourself. You can name a bank or broker as a Co-Trustee to manage investments if you think that will be best. If for some reason the Trustee of your grandchildren’s Trust does not authorize reasonable distributions for education or those and other real needs, your grandchildren will have the right to seek relief from a court.

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