The good news is that the answer is very simple. It is entirely up to the choice of the creator and the trustees. The creator, also known as the settlor, grantor, and exchanger, is the one who set the trust up. It is the responsibility of the trustees to follow the wishes of this individual, even though as settlor, s/he will have irrevocably signed off any further legal control over the trust at the beginning. As you may know from reading the eBook, that is one of the secrets of asset protection – – to entrust the assets to the trustees and relinquish all further legal control.
Control still exists, but it is based more on natural law – – ethics – – morals – – karma. It is a brotherhood/sisterhood of trust, wherein we trust each other more than we do the government, the attorneys, the police, the courts, and the violent military industrial complex. We trust each other. So, the trustees always follow the creator’s wishes, even though they are – – by design – – not legally bound to do so. On the other hand, if the trustees were to act in violation of the covenants in the corpus of the trust, that would be called a breach, and that can be litigated in court. We are not aware of any instance where that has ever happened with any of our trusts, but that kind of enforcement is available.
Nevertheless, in answer to your question, which of the three options you listed would be decided between the creator-settlor (now signed off), and the trustees. Whichever of the three methods, or perhaps other alternatives, they decide upon, they can do. In all cases, it must be consistent with any rules that the creator may have instituted in the trust in the beginning of its creation.
For example, if one of the beneficiaries is ten years old, and the creator has specified in the trust indenture that the trustees will handle the welfare of the child until he is eighteen, without giving any purchases or monies directly to the child from the trust until then, it would be a breach to suddenly do so prior to the specified age. It is also possible that the creator could have given no such specifications. Many trusts are written with very few rules, or no rules other than those minimum ones that our trust writer writes into them that are generic to ALL trusts – – in order to make them stand up in integrity.
If the creator had not given any detailed specifications as to if, when, and how assets would be distributed to the beneficiaries, then decisions could be made between the creator and the trustees along the way pertaining to distributions that would not have to refer to any rules for compliance. But if the creator had specified rules, then s/he would be obliged to follow them, unless s/he makes a Letter of Wishes to the trustees to change the rules.
Bottom line – – it is all up to the creator and the advisement of the trustees to work together to decide if, how, and when distributions will be made . . . not just to the beneficiaries, but also to other trust officers, including the trustees, or even to a former trust officer – – the creator – – as well as outside parties. There is no prohibition against the trust making distributions to any party as long as it doesn’t violate the simple standards that come with the trust, and as long as it doesn’t violate the protocols laid down in the trust by the creator at creation.