Custodial Trust – Glossary | RJP Estate Planning

Trust Terms

A simplified trust under Arizona's Uniform Custodial Trust Act where a custodial trustee holds property for a beneficiary's benefit.

A custodial trust is a trust where one person (the custodial trustee) holds and manages property for another (the beneficiary). In Arizona, these trusts are commonly used for minors. They also serve adults who cannot manage their own finances.

When Custodial Trusts Are Used

The most common scenario involves an inheritance left to a minor child. Minors cannot legally manage property. A custodial trust holds the assets until the beneficiary reaches a specified age. Adults with disabilities or limited capacity may also benefit. The trust provides for their needs without giving them direct control over large sums.

Custodial Trust vs. UTMA Account

An UTMA (Uniform Transfers to Minors Act) account is simpler but less flexible. It must distribute everything at a set age, usually 21 in Arizona. A custodial trust can extend management beyond age 21. It can include conditions on distributions. It can also provide detailed instructions about how funds should be used.

Why This Matters in Estate Planning

If you have minor children or grandchildren, your estate plan should address inheritance management. A custodial trust within your revocable living trust lets you choose the trustee. You set the distribution age and define what the funds can be used for. That level of control protects the people you care about most.