Advantages of Children's Savings Trusts

Posted by Ned Armand, President of Eastern Point Trust Company on Dec 17, 2014

The advantages of children’s savings trusts greatly outweigh conventional savings methods for children such as bank savings accounts, CDs, money market accounts, UGMA/UTMAs and 529s.

Let’s take a moment to examine the benefits of savings trusts for children.Children's Savings Trust, Trust, Kiss Trust


A trust is designed to be both flexible and adaptable in order to accommodate the changing needs of its beneficiary. By enumerating specific provisions, a trust provides security and peace of mind in ways conventional savings methods could never achieve.

Below are just a few examples of the versatility a children’s savings trust provides;

  • Control over how and when assets are used
  • Dynamic education savings options
  • Incentive distributions for good academic performance
  • Penalties for poor academic performance and bad behavior
  • Special needs provisions
  • Supplemental needs provisions
  • A safety net for minor children in the event of your death
  • Supervises the use and disbursement of your  life insurance death benefit
  • Addresses blended family asset planning needs
  • Offers gifting platforms for friends and family to gift into a trust
  • Ability to begin saving before the child is born


Unlike other savings methods, a children’s savings trust is not required to provide the child with access and control of the funds at age 18 (21 in some states). A trust controls how and when the money may be used, and may push access out decades into the future.

Below are a few examples of a trust’s benefits;

  • Prevents the age-old problem of “Cancun Accounts” by preventing unfettered access to funds at age 18.
  • Distribution schedules enumerate how and when trust assets may be used. 
  • Trust’s assets usually have a wider range of investment options than other types of savings plans and are not limited to the number of times per year investment changes may be made.


Children’s savings trusts can prevent problems before they happen. 

Below are some examples of how you can use a trust to govern events;

  • Exclusion of named individuals from ever obtaining assets
  • Prevention of a beneficiary’s ex-spouse from having access to trust assets
  • Protects assets from future outstanding debts, liens, and suits against the beneficiary
  • Provides oversight of the use of the estate for the benefit of the surviving children in case of the untimely death of the beneficiary’s parents


With proper professional trustee oversight, a children’s savings trust is one of the most secure savings options available today. Having professional trustee oversight ensures the trust’s provisions and schedules are adhered to and your wishes are executed for the life of the trust.

Below are some of the disadvantages of other savings platforms;

  • While other savings platforms may offer small tax advantages, the reality is they have material   shortcomings.
  • Below is a quick look at the common disadvantages of conventional children’s savings methods:
  • Access to funds at age 18 (21 in some states)
  • No asset protection
  • Lacks the ability to control use of assets
  • Limited investment options and limits on number of fund changes per year
  • Reduces Student Financial Aid
  • Restricts use and tax penalties if used for non-qualifying expenses

You can never start the benefits of a trust too early. Download your free Student Financial Aid Checklist today to see just how your financial planning for your child’s financial future and safety can be enhanced.

Download a Free FAFSA Checklist

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