Can Trusts Be Used for the Benefit of Minor Grandchildren? Absolutely!

We have always discussed in previous blog articles about the numerous benefits of establishing a revocable living trust for your family. Primarily, most of our clients discuss and are excited about the fact that a revocable living trust can be used to avoid probate and provide a smooth transition for their loved ones when they are gone. However, there are many more benefits of a revocable living trust in addition to probate avoidance. 

For instance, a revocable living trust can also be used as a vehicle to provide for the benefit of minor grandchildren. For example, a grandparent may want to provide for the education of their grandchildren who are minors and the grandparent may not be around when the grandchild receives this gift. In addition, the grandparent may have concerns that if this gift is left outright to the grandchild in a trust or in a Will, even if the grandchild is a minor and the asset is protected by a guardian, that the grandchild may squander the asset when the grandchild reaches the age of 18. 

A revocable living trust can be used to provide for the education of a grandchild by providing a source of funds for that education. For example, the revocable living trust could include trust language that says $x located in the settlor’s Investment Account ending in account number 0000 shall be set aside for the education grandkid #1. In the event that grandkid #1 pursues higher education, the trustee shall use the funds located in settlor’s investment account for the costs of grandkid #1 pursuing a degree or degrees of higher education. In the event that grandkid #1 does not pursue a degree or degrees of higher education by age 25, then the investment account shall revert back to the remainder of the estate assets. 

In non-legalease terms, what this means is that the grandparent is leaving the investment account to be used by the trustee only for paying for grandkid #1’s higher education. Now, in the event that grandkid #1 does not pursue higher education, the investment account would be considered an ordinary asset that would be distributed in accordance with the remainder of the provisions of the revocable living trust. This type of trust language would allow a grandparent to leave an asset for the benefit of grandchild’s education, and have the assurance that the asset would be used for education only.

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