Where is the money currently and why is the bank telling you it cannot be transferred to your grandchildren?
Are any of your grandchildren 18 years of age or older?
It sounds like you have a UTMA (Uniform Transfer to Minors Act) account.
The money in this account belongs to the grandchildren, but is controlled by the custodian until the minor reaches the age of trust termination. (The age of trust termination is 18 to 21, depending on the state and whether it is an UGMA or an UTMA. Most UGMAs end at 18 and most UTMAs at 21, but it does depend on the state.) The custodian has the fiduciary responsibility to manage the money in a prudent fashion for the benefit of the minor.
If you have cashed out the mutual funds account, you should establish a new checking account that will give you easier access to the funds.
It is important to title the account correctly. The proper way of titling a custodial account is "[Custodian's Name] as custodian for [Minor's Name] under the [Name of Minor's State of Residence] Uniform Trust to Minors Act". The funds may then be withdrawn by authorization of the custodian but must be used for the benefit of the grandchildren. You cannot directly transfer the funds to their name if they have not yet attained the age of trust termination.
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A successor custodian is normally only appointed upon the current custodian's death or legal incompetence. Outside of those two events, you would need to file a petition in court to legally have the custodXXXXX XXXXXed on these accounts.