How To Establish A Beneficiary Trust
Any distribution to a child or grandchild of the grantor, or any other beneficiary who is a minor, should be made to a children’s or grandchildren’s trust, or should be transferred to some type of restricted distribution.
Why? Because you do not want to have outright distributions passing to a minor.
A children’s trust can be set up with a separate trust share for each child, or can be set up as a pot trust. With a pot trust, all of the funds for all of the grantor’s children are set aside in a single trust that can make distributions to any of the beneficiaries.
A children’s trust can provide for income to be distributed purely at the grantor/trustee’s discretion, can provide for mandatory income distributions to the beneficiary once he/she reaches the age of 18, or can provide for the health, support, maintenance and education of the beneficiary. A children’s trust can be set up to provide distributions for a child to start a business. It can be set up to buy a child a house, or provide a child with funds to buy the house themselves. It can also be set up to provide for mandatory lump-sum distributions of principal at intervals that are based on the beneficiary reaching a particular age, on the occurrence of a particular event (i.e., graduating from college), or at intervals following the grantor’s death.
In a children’s trust, you can choose the milestones at which you want distributions made to your children and grandchildren. A children’s trust is a gift that can remain long after your death.