What Is An Educational Trust?
An educational trust is an estate planning technique used to set aside funds from the assets you have when you pass away to be used for education. The funds can be used for your children’s’ education, your grandchildren’s’ education, your nieces’ and nephews’ education, or anyone you want to benefit from your generosity. When you set up an educational trust, you can ensure that your assets are specifically earmarked for education. The assets in an educational trust will not be spent on other matters until educational expenses are fully paid.
An educational trust can benefit you (the Trust Creator) because:
- You can be sure your children, grandchildren, or other relatives can pay for their education
- You can preserve funds specifically for education and not for other expenses
- You can use assets that have tax advantages if spent on education to reduce your own tax burden now
An educational trust can benefit the Trustee (who is in charge of using trust funds for educational purposes, most often a parent guardian) because:
- You can know exactly how to spend funds on educational matters
- You can preserve asset for education of the beneficiaries without needing to explain why
- You can have clear direction on what to pay for, and what to not pay for out of trust funds
An educational trust can benefit the beneficiary of the Trust (teenager or child) because:
- The beneficiaries of the educational trust can have their education paid for
- The beneficiaries of the educational trust may be able to attend an educational institution that otherwise would be too expensive
As as an added benefit for you the Trust Creator:
- You can also choose what happens to any money left over in the trust when all beneficiaries have completed their education.
If you don’t have a plan to pay for your children, grandchildren, or other relatives’ education, then an educational trust can benefit you!
Getting An Educational Trust In Colorado
As a basic definition, an educational trust is a legal arrangement where you put assets into a trust and lay out the terms of how those assets may be used for education. You may consider if assets are to be used just for tuition, or may also be used for room, board, or other expenses. You may choose if assets are to be used for undergraduate education only, or for graduate school also. You can also choose if assets are to be used for trade schools, or other educational pursuits.
An educational trust can be its own trust, or can be just one part of a trust that reflects your overall estate plan. You can choose how to structure your own trust and estate plan to best fit your needs. You can also choose what happens if any money remains in the educational trust when education is done.
Who Could Benefit From An Educational Trust?
There are many reasons a person might need an educational trust, which may include:
- You want to be known as the kind and generous parent or grandparent who helped your children, or grandchildren, go to college
- You value education and want to support your family’s continued education
- You are just a generous person who wants to help your family
- Your children, or grandchildren, want to go to school, but may not have a lot of money to pay for education
- You are concerned about the rising cost of college tuition and want to help your family
- Your children, or grandchildren, may not qualify for scholarships
- You can dictate what type of education may be paid
- You can fund an education trust with just your assets, or you can put assets into an investment that can be leveraged up – increase at the time of your death.
To learn more about this, you can read my blog post on setting up an educational trust for your grandchildren. That post has more detailed information on using leveraged up assets in an educational trust.
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The Specifics For Educational Trusts
✅ Who do you want to benefit from your educational trust?
⏹ Your Children ⏹ Your Grandchildren ⏹ Other Family Members
✅ What type of education would you like to cover?
⏹ Undergrad ⏹ Graduate School ⏹ Doctoral ⏹ Trade School
✅ Are there limits on how much to pay per beneficiary of your educational trust, or a split of assets among multiple beneficiaries?
✅ How do you plan to fund this educational trust, and how can you best utilize the assets you have to pay for educational expenses?
The Basics For Educational Trusts
✅ List of Assets, including approximate value – if you have investment assets, please bring a recent statement from the brokerage house that holds the assets
✅ A recent bank statement
✅ List of names, addresses, and phone numbers for those to whom you plan on leaving assets in a will – usually this is children, relatives, or even charities
✅ A copy of the deed to any real estate you own – if you can find it
✅ Decide who you want to use as your agent under a power of attorney, and that person’s name, address, and phone number, if not included above
✅ Decide who you want to be in charge of distributing your assets upon your death, including that person’s name, address, and phone number, if not included above
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Who Is The Best Fit For A Special Needs Trust?
A trust is an arrangement whereby property or assets are placed into a legal entity called a trust, so that property and assets can be held and used for the benefit of a person called a beneficiary. A personal, called a “trustee,” controls property in a Trust.
If education is important to you, and you want your children, or grandchildren to reap the benefits of an education, then setting up an educational trust is for you. You can help ensure a good education for the rest of your family, even after you are gone. Your family will reap the rewards of your generosity, and at the same time you will support something important to you.
At Michael Bailey Law Office LLC, our estate law expertise saves you time and money when transferring an estate. Everything necessary to plan for a smooth estate transfer to happen can be put in place by Michael Bailey Law Office LLC’s lawyers.