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.