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Crafting a Lasting Legacy: A Guide to Setting Up a Trust Fund for Grandchildren

  • Feb 5
  • 3 min read

Understanding the Purpose of a Grandchildren’s Trust


Trusts established for grandchildren are commonly used in estate planning to support long-term family goals, provide financial structure, and manage how assets are distributed across generations. Rather than transferring assets outright, a trust allows grantors to define rules around timing, purpose, and oversight.


This guide provides a general educational overview of how trust funds for grandchildren are commonly structured and the considerations involved.


Why Families Use Trusts for Grandchildren


Trusts for grandchildren may serve several planning objectives.


Common motivations include:


  • Supporting education or healthcare expenses

  • Providing long-term financial support

  • Encouraging responsible asset use through structured distributions

  • Managing wealth across multiple generations

  • Coordinating estate tax planning strategies


Each family’s goals influence how the trust is designed.


Types of Trusts Commonly Used


Revocable Trusts


A revocable trust may be used as part of a broader estate plan. While it offers flexibility during the grantor’s lifetime, assets in a revocable trust are generally included in the grantor’s taxable estate.


Irrevocable Trusts


Irrevocable trusts are often used when long-term estate and tax planning is a priority. Once funded, these trusts generally cannot be modified, and assets may be removed from the grantor’s taxable estate, subject to applicable rules.


Generation-Skipping Trusts (GSTs)


Generation-skipping trusts are designed to benefit grandchildren or later generations directly. When structured properly, they may help manage or reduce generation-skipping transfer (GST) tax exposure.


GST trusts are complex and require careful coordination with tax professionals.


Hands signing a legal document next to a small wooden house model, with text 'DESIGN YOUR TRUST'.


Distribution Structures and Controls


One of the primary advantages of a trust is the ability to define distribution terms.


Common Distribution Approaches


  • Distributions for specific purposes, such as education or healthcare

  • Age-based or milestone-based distributions

  • Trustee discretion based on beneficiary needs

  • Staggered distributions over time


These structures help align asset use with family intentions.


Trustee Selection Considerations


Selecting an appropriate trustee is a critical decision. Trustees are responsible for administering the trust according to its terms and acting in the best interest of beneficiaries.


Trustees may be:


  • Family members

  • Professional fiduciaries

  • Trust companies

  • A combination of individual and institutional trustees


Trustee capability, impartiality, and long-term availability are important considerations.


Two people shaking hands over a table, signifying agreement, with text 'CHOOSE A TRUSTEE'.


Tax Considerations


Trusts for grandchildren involve several potential tax considerations.


Key Areas of Review


  • Gift and estate tax implications when funding the trust

  • Generation-skipping transfer (GST) tax exposure

  • Income taxation of trust earnings and distributions


Tax outcomes depend on trust structure, funding strategy, and applicable exemptions.


Coordinating With Broader Estate Planning


A grandchildren’s trust is most effective when integrated with the broader estate plan. This coordination may include:


  • Alignment with wills and other trusts

  • Review of beneficiary designations

  • Integration with charitable strategies

  • Long-term family governance planning


Periodic review helps ensure the trust continues to reflect evolving family goals.


When a Trust for Grandchildren May Be Considered


Families often explore grandchildren’s trusts when:


  • Wealth transfer spans multiple generations

  • There is a desire for structured financial oversight

  • Education funding is a priority

  • Long-term legacy planning is important


There is no single approach that fits all families.


Conclusion


Trust funds for grandchildren provide a structured way to support future generations while maintaining oversight and alignment with family values. By understanding trust types, distribution options, and tax considerations, families can engage in more informed estate planning discussions.


Because trust planning involves legal and tax complexities, professional guidance is an important part of evaluating these strategies.



Investment advice offered through Stratos Wealth Partners, Ltd., a registered investment advisor. Stratos Wealth Partners, Ltd and Parkview Partners Capital Management are separate entities. Neither Stratos nor Parkview Partners Capital Management provides legal or tax advice. Please consult legal or tax professionals for specific information regarding your individual situation. Investing involves risk, including possible loss of principal. The information presented is for educational purposes only and should not be interpreted as individualized investment, tax, or legal advice. Past performance is not indicative of future results. For more information, please review our Form ADV, available upon request.


 
 
 

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Financial Advisor, Investment Advisor, High Net Worth, Wealth Management, Tax Planning, Risk Management, Financial Coordination, Retirement Planning, Charitable Giving, Columbus Ohio, Parkview Partners Capital Management

291 East Livingston Ave.
Columbus, OH 43215


Phone: (614) 427-2132

Fax: (614) 427-2132

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