What are the benefits to leaving money for my child in an education trust?
The costs of a college education are ever rising. According to the College Board, the average cost of tuition for the 2017-18 school year was $34,740 at private colleges across the country and $9,970 for state residents. Education is one of the greatest single expenses a parent will occur, so starting to save early is imperative. One option for parents is to place funds for college within a trust for education.
Benefits of an Education Trust
A trust is a legal entity in which the trust creator places property within the name of the trust, to be held by the nominated trustee for the benefit of another. The named trustee will be charged with managing the trust for the beneficiaries. There are several benefits to using a trust to handle your educational funds, as opposed to setting these funds aside in a bank account. These include:
Reducing your taxable estate: Assets transferred to the ownership of
Control: The main reason that parents create education trusts for their children is the control they offer. As the trust creator, you will be in charge of appointing the trustee and setting the terms for distribution of the funds. The trustee will maintain control over the funds until your child reaches the age outlined within the trust. You can also stagger distributions and set certain conditions for disbursement. For example, with an education
Educational trusts are best used if you have already saved a significant amount of money to be applied toward your child’s education. Smaller sums may be better invested in an education savings account. You can set up either a living trust for use during your lifetime or a testamentary trust which can be established within your will. Contact an estate planning lawyer to find out more about whether an education trust is right for you and your child.