My mother, recently deceased, had an irrevocable trust. In that trust, she left monies to 3 grandchildren to be held in trust. Do I need to set up new trusts for each of the three of them, and does that make the original trust void after all monies are dispersed?
The trust terms will govern termination of the trust. A trust may also be terminated if it is uneconomical to continue the trust.
The Uniform Gifts to Minors Act (UGMA), superseded by the Uniform Transfers to Minors Act (UTMA) in some states, is simply a way for a minor to own property, such as securities.
The UGMA/UTMA setup is commonly used to give monies to a minor. IRS regulations allows a person to give many thousands of dollars per year to any other person with no tax consequences. If the recipient is a minor, the UGMA provides a way for the minor to own the assets without involving an attorney to establish a special trust. When giving assets to a minor using a UGMA/UTMA, the donor must appoint a custodian (the trustee).
An UGMA/UTMA is a trust like any other trust except that the terms of the trust are set in the state statute instead of being drawn up in a trust document. Should a trustee fail to comply with the terms of the UGMA/UTMA, this would expose the trustee to the same actions as a trustee who fails to comply with the terms of a special drawn-up trust. A gift made under the Transfers to Minors Act is irrevocable and conveys to the minor vested legal title to the gift. After the transfer, the gift and its proceeds become known as custodial property. The named custodian holds, manages and invests the custodial property. The custodian has broad discretion in making expenditures and may, but need not, consider various factors in making these expenditures.
The role of the custodian is to act as guardian of the funds until the minor turns 21 years old and the custodian closes the account and turns the funds over to the minor who has now reached the age of majority. However, the court, on the petition of a parent or guardian of the minor or of the minor, if he had attained the age of fourteen years, may order the custodian to pay over to the minor for expenditure by him or to expend as much of or all the custodial property as is necessary for the use and benefit of the minor.
