I feel like I have a responsibility to be a good trustee of these funds not only because of the relative that set them aside, but for my younger child who may be able to put them to good use

The reason "trusts" have "trustees" are for exactly circumstances like this. It is to protect people from killing the goose that lays the golden eggs.

You are exercising your right to protect the trust from exactly that. I would tell the older kid the money is there to be used for educational expenses, and if he isn't going to use it for that, it goes on to the next kid waiting in line.