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.