College expenses are not what they used to be as they increase every year at state and public universities. How will your grandchildren pay for school? A part-time job, loans, grants and scholarships may fulfill some of the expenses. So might a traditional 529 savings plan.
But another option – especially for high net worth individuals – may be an education trust; one that can last generations. If you want the trust to exist well after you die, you will have to seed it with a substantial amount of money. Even $100,000 may not be enough. The number be even closer to $1 million.
Some philanthropists look beyond funding the educations for their grandchildren, raising the stakes to help students throughout their communities and states. Education trusts are becoming more common among high net-worth grandparents. They may want to ensure that their young grandchildren won’t have to worry about the financial resources to complete their education.
Things to think through
There are a number of things to consider when creating an educational trust:
- Since you must specify how the assets will be managed, find a dependable trustee who can manage the trust.
- Remember that the trust will provide you with some influence, giving you the chance to make an indelible mark on your descendants’ education. Perhaps you hope they will attend your alma mater or a school within your home state. The trust can help get that message across.
- If the child does not pursue studies in higher education, you must include instructions as to how the trust funds will be used in an alternative way.
- Should the trusts provide equal benefits to the grandchildren? You may have a grandson attending a costly private school, while a granddaughter may be enrolled in a much more affordable public school. How do you weigh the competing dollar amounts without hurting feelings? That’s why the trust should include specific instructions.
Think through this matter if you decide to pursue an educational trust. Do some research and turn to legal experts who can help. You want your money to help fulfill the dreams of college students – some of whom are your grandchildren.