What are the benefits of an educational trust?
College education prices are rising each year. Parents can expect to pay anywhere between $9,000 and $34,000 in tuition and fees annually, depending on whether your child attends a public or private university. In addition to tuition costs, parents must anticipate the costs of housing expenses, food, books, and other supplies. To help provide for your child’s future educational needs, you may wish to consider setting up an educational trust. Our Tampa estate planning lawyers discuss educational trusts and their many benefits below.
Education Trusts Explained
A trust involves a legal arrangement whereby property is given by a grantor to be held by an appointed trustee for the benefit of the trust beneficiary. The trustee is charged with managing the trust, while the beneficiary will eventually receive the assets held by the trust. Trusts have become a popular estate planning tool among parents as they allow you to pass down assets to your child without tax penalties.
There are numerous types of trust, with educational trusts being among the most common. An educational trust allows parents to gift money to the trust for the specific purpose of paying for education related expenses. Parents that gift under the yearly gift amount will not need to pay taxes on funds going into a qualifying educational trust.
In your education trust, you can specify certain terms of disbursement. For example, you could require that funds be given in certain increments to your child once he or she turns 18. You could potentially require that all funds go directly to tuition costs. You could alternatively distribute funds by achievement, with your child receiving a certain amount if they meet a set grade requirement. The possibilities are endless and your estate planning lawyer can assist you in creating a trust that meets your desires.
Parents have many options when it comes to setting aside funds for their child’s future. Your attorney can explore with you the numerous possibilities, including 529 plans, educational trusts, and prepaid college plans. Contact an estate planning attorney today to get started preparing for your family’s future.