If you are one in the nearly 40,000 Arkansas grandparents raising grandchildren, thank you. Thank you for stepping into the gap for your grandchildren. Your grandchildren depend on you. Plan now to secure their future.
While the children are under age 18, if you give them money, their parents could gain control of the money. The best way to handle distributions to minors is with a trust.
A trust allows you to select who will make decisions about the investing and spending of the trust assets. You select the criteria to make those decisions. You select who benefits from the trust.
Trusts allow you to continue to encourage your grandchildren to great things. For example, bonus distributions of trust assets could be made upon completion of high school, college, and graduate school or earning a Pulitzer Prize.
Trusts allow you to teach your grandchildren about giving to the community and helping others. Part of your trust could be set aside for distributions to charities and your grandchild could help choose the charities. Your trust could make a donation to a local community foundation and your grandchild would learn about selecting charities and prioritizing needs.
Trusts avoid probate. The trustee transfers trust assets at your death according to the terms of the trust and without the involvement of a court. There is no need to probate a will or get someone appointed to manage the trust assets—you have already taking care of that!
Trusts are private. Trusts do not need to be recorded. They are not public documents. No one is involved in how your family is managed except for you.
Trusts are difficult for your children to break or control. If your children are not beneficiaries of your trust, in Arkansas they are not entitled to a copy of the trust. Without a copy, it is difficult to challenge the terms of the trust. Because trusts are not filed with a court, it is more effort to take them to court for someone wanting to dispute the trust.
Trusts usually become irrevocable at your death. The terms of the trust which contain your plans and goals, cannot be changed by a child who would like to become a beneficiary. The person in charge of your trust is legally required to care for the beneficiary and no one else.
Trusts are more flexible than annuities but still have more controls. If assets are left to a beneficiary in an annuity, often the beneficiary can choose to take the funds early and pay a penalty. If the annuity is irrevocable, most of the funds will be unavailable to the beneficiary if there is an emergency. Trusts can address both situations while still leaving you in charge instead of the beneficiary.
It is your money. Make sure that it goes where it is needed to care for your grandchildren.