No the grandparents do not report anything. Any 1099 would be issued under the child's SSN. If the child was under 19 (or under 24 if a full-time student) the kiddie tax rules apply. If the only income was interest, dividends, and capital gain dividends then a) the parents could report the income on their return using form 8814 or b) the child could file a return using form 8615. Option b may produce lower combined income taxes. If there were capital gains from the sale of assets the child must file a return and include form 8615.
you may want to see this concerning age of majority and trust termination. Once the trust terminates the child is free to use the trust assets as they see fit.
https://finaid.org/savings/ageofmajority/
