TRUST BENEFICIARIES: TO GIVE OR NOT TO GIVE

By Sean P. Dougherty, Associate Attorney

What happens when you leave your grandchildren a gift in your trust?

It’s very common for grandparents to want to leave a little something for their grandchildren. After all, it’s a grandparent’s job to spoil their grandchildren, right? If you’re a grandparent, you may choose to leave each of your grandchildren a special gift of cash—or even a home for them to live in someday—in your trust. 

By establishing a trust, you can manage your assets while you are alive and appoint an individual who will be responsible for distributing your assets to your trust beneficiaries. You may also want to supplement your trust with a will, which clearly spells out the conditions around the distribution of your property and the care of any minor children in your life.

If your grandchildren are young or still maturing, you may want to specify that the gift will be held in trust for them until they reach a certain age—commonly 25 or 30. Now, you can sit back and relax, knowing that you’ve given your grandchildren—your trust beneficiaries—a head start in life. But have you actually accomplished that?

Trust beneficiaries over 18 years of age are entitled to “a true and complete copy of the terms of the trust”

When setting up a trust, here’s an important law you need to be aware of: California Probate Code Section 16061.7. When you die and your grandchildren become trust beneficiaries, they are entitled to “a true and complete copy of the terms of the trust” when they reach 18 years of age. If you’ve decided to leave your grandchildren a substantial amount of money or a home, consider whether you just diminished their motivation to work hard and live an independent life.

Even if you’ve only left your grandchildren what you believe is a small amount of money, that amount may not be so small in your grandchildren’s eyes. And, even though your grandchildren can’t access the money immediately after you die, they now know that they have money coming their way in the future. So they may think they are on easy street.

Consider a goal-oriented approach to trust administration for younger trust beneficiaries

Like most things in estate planning, how you handle this issue depends on your family dynamic. If you trust your children, it might be a better idea to just leave everything to them. Then they can decide how to best put your assets to use, based on their family’s specific needs. But if you don’t trust your children 100%, then you might choose to leave the gift to your grandchildren. If you make that decision, you may want to consider adding in some milestones that they must achieve—also known as “standard and incentive provisions”—before they are eligible to receive the gift. These goals can be anything—from sobriety to graduation from college to landing a job.

​Since family dynamics and laws change over time, it’s important to periodically review your estate plan, both with your family and your attorney, and update it accordingly. If you’re inexperienced in the realm of estate planning, take a look at our frequently asked estate planning questions for some background information.

Have questions about trust beneficiaries, estate planning, or trust administration?

If you do have any questions or concerns about your specific family dynamics and your estate and laws around trust beneficiaries, the experienced attorneys at Rusconi Foster Law Firm will provide personalized guidance. Contact us today: by phone at 408-779-2106 or email at [email protected].