How can I set up a trust account in a bank for my granddaughter?
Expert Answer by Steve Weisman
Steve Weisman hosts the nationally syndicated radio show A Touch of Grey, heard on more than 50 stations, including WABC in New York City and KRLA in Los Angeles. He is a practicing lawyer specializing in estate planning and is admitted to practice before the United States Supreme Court.
The best way to set up a trust account -- especially for a large sum of money -- is to have a lawyer draft a trust specifically tailored to your specific needs and wishes.
If you don't want to go that route, you have a couple of options. When the amount to be held in trust is a relatively small amount, some people choose what is called a "Totten Trust." A Totten Trust is a relatively simple arrangement where there is no detailed trust agreement, but rather a simple form provided by most banks that indicates that the money held in the bank account is being held by the depositor. The depositor keeps total control over the funds until his or her death, at which time the money is paid to the person named as the beneficiary.
Perhaps a better option (if the amount involved is not very large) would be to set up a bank account under the Uniform Transfers to Minors Act (UTMA.) This law, which has been adopted in all states, would allow you to hold a bank account in the name of your granddaughter, but with you as custodian of the account. She would receive the funds when she reaches a certain age (as determined by your state -- it varies from as young as 18 years old in a few states to as late as 25 years old in California.) Until the time of final distribution, you are free to use this money for your granddaughter's needs as you determine. Also important to know: UTMA accounts are simple and cost nothing (other than typical bank fees) to set up.
