Whether you are a parent, grandparent, savvy aunt, godparent, or doting friend or relative, there may be children in your life whom you want to support as they grow, whether you are still alive or not.
A thoughtful and truly life-changing way to do this is to set up an education trust for those young people. This will help to ensure they have the resources necessary to pursue a great education for themselves someday in the future.
If you are considering an educational trust for the benefit of your children or loved ones, there are several questions you will want to ask, and answer, first.
Education Trust Question #1 – One big trust or several small ones?
If you are looking to provide educational funding for multiple children, you need to determine whether you want them all to draw from one single trust or if it makes more sense for you to set up several individual ones. One key thing to consider is how the money will be divided. For example, what if the older children went to expensive, private universities and used up the money before the younger children were ready to head off to college?
Education Trust Question #2 – What kind of trust do you need?
Your estate planning attorney will go over your options with you, helping you come up with a plan that makes the most sense. While it might be common for grandparents, for example, to set up a trust through a will, that means that it won’t be available until after the grandparents pass away. Perhaps a living trust is a better fit in order to protect the money but still have it available when needed.
Education Trust Question #3 – What will the funds actually pay for?
One of the reasons that people set up education trusts is so they can continue to guide their beloved next generation in making good choices for their future. Because of this, you may need to think hard about just what you are willing to allow the trust to cover. For example, if your intention for the money was to pay for college tuition, how would you feel if the child chose instead to use it for private high school, technical or trade school, or a study-abroad program?
In addition, do you plan to limit the student’s options on how to spend the money? Is it all supposed to go toward tuition, or can it be used for room and board, books, or other school-related expenses? Would it make more sense to pay out in annual lump sums directly to the school, or would you like the young person involved to have a monthly stipend in order to avoid having to work while going attending classes.
Education Trust Question #4 – Does the young person have to earn the money?
If part of your intention with setting up the education trust is to instill certain values in the next generation, then you might expect the young person to meet certain criteria in order to have access to the money. For example, he or she will have to gain acceptance into an institution of higher education. You might also consider requiring a certain annual GPA in order to earn access to the next year’s payout. An estate planning attorney with education trust experience will be able to offer suggestions on these and other possible guidelines.’
Create an Education Trust For Your Loved Ones
As with the creation of all trusts, the key is to take an honest look at the unique needs and dynamics of your family and create your trust with those issues in mind. Answering these questions will provide a great start in setting up an education trust that provides just enough flexibility and support for your children or loved ones during the college years.
Orange County estate planning and probate attorney Darlynn Morgan is at Morgan Law Group, a unique law firm that she created to truly make a difference in the lives of her clients.
She’s really good at making it easy for your family to talk about and plan for tough subjects like money, death and taxes. For more, you can Follow her on Twitter , Friend her on Facebook or check out her Blog. If that’s not enough, you can also find her on Linked In or Avvo.