Florida’s Dedicated Estate Planning and Education Trust Lawyers

family discussing education trustRaising children has always been expensive. Paying for basic necessities, sports and hobbies, family vacations, and the unexpected events in life quickly adds up. New generations are also faced with the prospect of paying for college, an expense that grows more and more out of hand with each passing year.

Tuition prices have soared over the last few decades, making it difficult for many families to afford higher education – or even private K-12 education – without borrowing money or taking out student loans. While loans or working through school are often the best option available for most, some families are lucky enough to have the assistance of wealthier family members to rely upon. In those cases, the challenge becomes structuring money to best protect it for the future.

When parents are able to save money for their children’s education, they often do so through 529 accounts, which allow for tax-free savings for educational purposes. For other family members, or close friends who would like to support a child, the best option may be an education trust. Setting up an education trust comes with many benefits, but must be done properly.

Are Education Trusts Allowed in Jacksonville?

Education trusts are allowed in Florida and can be set up with the assistance of a trusts and estates attorney. An education trust is created by the individual who owns the assets that will fund the trust, and the child who will receive the benefit of the trust for education is the beneficiary.

An education trust is overseen by a trustee, who can ensure that the trust is used for educational purposes. Through the trust instrument, the trustee can be directed to handle the funds in virtually any manner the grantor would like.

For example, the trust may provide that beginning when the beneficiary turns 18, he or she will receive a set amount of money each year that can be used for educational purposes. The beneficiary may then have to account for the funds at the end of the year, providing proof to the trustee of how the funds were used.

Alternatively, the trust can be set up so that the trustee pays educational expenses directly. A child may submit his or her tuition bill directly to the trustee, and the trustee will pay the funds directly out of the trust.

Deciding how the trust should work is really up to the grantor. It may be based on what is easiest for the trustee, whether the grantor trusts the beneficiary to use the money for educational purposes, as well as other considerations.

Educational Trust Considerations

In addition to figuring out how educational money will be distributed out of a trust, there are other important factors for a grantor to consider when setting up an educational trust.

First, the grantor should consider the number of potential beneficiaries that the trust will benefit. It may be possible for the grantor to know exactly how many children will benefit, or the grantor may anticipate future children down the road. If there is more than one child who will benefit from the trust, the grantor must also give directions on how the funds will be distributed between the beneficiaries.

Second, the grantor also needs to consider what type of education the trust will pay for. Does only a traditional four-year college qualify? What about trade schools? In some instances, a child may pursue a career path with an unconventional educational process, such as apprenticeships or internships. In order to make a trustee’s life easier, it is helpful if a grantor provides direction on these issues.

Finally, the grantor must also consider what should happen to the funds in the event the beneficiary chooses not to pursue higher education. A grantor may decide that once the beneficiary reaches a certain age and can be trusted to use the money responsibly, the money should go to the beneficiary even if not for educational purposes. Or the grantor may decide that if the funds are not used by one beneficiary, they should go to a different beneficiary.

Educational Trusts versus 529 Plans?

Educational trusts have several advantages over traditional 529 plans and should be considered by anyone who has the ability to devote a significant amount of money to educational endeavors.

Perhaps most importantly, Florida limits the amount of money that can be placed into a 529 plan on any given year. An educational trust does not have this kind of a limitation. Accordingly, parent’s trying to catch up on educational expenses can better do so through a trust. Similarly, grandparents trying to make a large donation for educational purposes are better suited to use a trust vehicle as well.

Trusts also give the parents, or grandparents who granted the money more control over how the funds are used because they can set up the terms of the trust, rather than being bound by the terms of a 529 account.

However, 529 accounts can be funded with pre-tax dollars which may be helpful for some families that are trying to contribute more to educational expenses. They also allow for tax-free withdrawal of income for educational purposes, which means your children will not be taxed on the growth in the account if used properly.

Florida Attorneys Advising You on How to Support Your Child’s Educational Future

Deciding whether to set up an educational trust as opposed to a 529 account is a very personal decision that will depend on the unique circumstances your family is in and how you want to set your child up for success. While educational trusts are flexible and useful vehicles for funding educational expenses, they are not for everyone.

At Beller and Bustamante, P.L., our estate planning attorneys can help you to closely look at your educational needs, your current financial situation, and the degree of control that you would like to have over the funds you are providing your child, before making a plan on how to proceed. For more information, contact us online or at (904) 288- 4414.