If you’re a grandparent thinking about setting up a trust fund for your grandchildren, you’re probably hoping to give them a meaningful start in life—without handing over a lump sum that could be overwhelming or misused. Trusts can feel formal, but with a few clear steps and some thoughtful planning, you can create something that genuinely supports your family’s future. This guide is written for everyday families, not legal experts, and aims to make the process feel manageable and relevant.

Why set up a trust fund for grandchildren?

A trust fund lets you gift money or assets now, while guiding how and when those resources are used. It’s especially useful if you want to:

• Support education, apprenticeships, or a first home.

• Help parents by having trustees handle the admin and release funds at sensible milestones.

• Protect money from impulsive spending, peer pressure, or unexpected life events.

Common trust types for grandchildren:

• Discretionary trust: Trustees decide what to pay, when, and to whom, within your guidance. This is flexible and can adapt to changing needs.

• Interest in possession trust: Rarely used for children, but can provide ongoing income for education costs.

• Bare trust: The child owns the money outright and gets full access at 18. Good for smaller gifts or when you’re comfortable with early access.

Step-by-step: setting up a trust fund for grandchildren

1. Clarify your purpose and timing

Start by writing your aim in one sentence. For example:
“Support Mia’s education and first home; release the rest at 23.”
This helps everyone understand what you want the trust to achieve and when.

2. Appoint trustees

Choose two adults who are calm, organised, and able to work together. Often, a parent and an aunt or uncle make a good team.
Talk through practicalities: when you expect them to pay for course fees, laptops, tools, or rent top-ups.
Tip: Trustees should be comfortable making decisions and keeping basic records.

3. Create a short trust deed and letter of wishes

The trust deed sets out the legal rules: who the beneficiaries are, what powers the trustees have, and how money can be used.
Keep it readable and straightforward.
Add a letter of wishes listing examples of allowed spending and age milestones. For instance, you might say, “Pay for textbooks and travel during university, release a lump sum at graduation, and top up a Lifetime ISA for a first home.”
This makes it easy for trustees to act without second-guessing your intent.

4. Open the account and fund it

For short-term needs, use a trust bank account. For longer timelines (over five years), consider an investment account in the trustees’ names as trustees of the trust.
Providers will ask for the trust deed, so keep it on file.
Example: If you’re planning to help with a first home, you might set up an investment account to grow the fund, then transfer money to a Lifetime ISA each year (subject to LISA rules).

5. Keep simple notes

Store bank statements and jot down a one-line reason for each payment.
This keeps everyone aligned and makes filling out forms like R185 (showing trust income paid to a beneficiary) straightforward.
Tip: Set up a shared digital folder for trustees to keep everything organised.

Real-life examples

• Education-first: Trustees pay for textbooks, travel, and part-rent during university from investment income. A small lump sum is released at graduation for relocation costs.

• Practical trades: Trustees cover tools and exams for an electrical apprenticeship, with a bonus payment once qualified.

• First-home help: The trust contributes to a Lifetime ISA each year and tops up the deposit when the time comes.

Watch-outs and practical workarounds

Full access at 18 (bare trust): If you’re worried about early access, choose a discretionary trust and set staged releases at 21, 23, or 25, or link payments to specific purposes like education or housing.

Admin fatigue: Too many rules can make decisions difficult.
Workaround: Use a short deed and a clear wishes letter with practical examples.

Market ups and downs: Investments can fluctuate.
Workaround: In your wishes, set priorities—such as always supporting education first if returns are low.

Family dynamics: Disputes can arise if trustees don’t communicate well.
Workaround: Pick trustees who get along and keep notes available to parents so everyone stays informed.

What to do next

• Decide which trust type fits your goals and flexibility needs.

• Choose trustees and write a short wishes letter with examples of allowed spending and milestones.

• Open the trust account and pay in the first amount.

• Set a calendar reminder for a quarterly 15-minute trustee check-in to review records and decisions.

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Gentle reminder

This is general information only—not legal, financial, or tax advice. Every family is different, and the right trust setup will depend on your circumstances. Keep things simple, write down your intentions, and adjust as life changes. Setting up a trust fund for your grandchildren is a thoughtful way to support their future, and a little planning now can make a big difference later.