How do I set up a trust for my grandchildren?
UPDATED: February 20, 2013
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It might be a better idea to have the Trustee distribute the assets more slowly. For example, your grandchildrens assets could be released at 18 only at the Trustees 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 grandchildrens 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 grandchildrens 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.