Can I Use a Trust Fund for My Grandchild’s College?

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You may be filled with pride and joy that your grandchild is continuing their education at a university or college. At the same time, you may have a great understanding of the financial implications that come with attending higher education. This is why you may want to offer them some sort of support. Continue reading to learn whether you can use a trust fund for your grandchild’s college and how an experienced Putnam County trusts attorney at The Law Office of Andres D. Gil, PLLC can help you in establishing one.

Can I establish a trust fund to support my grandchild’s college education?

Establishing an irrevocable trust fund is likely the most favorable means for supporting a beneficiary’s education costs. This is because this type of trust removes your given assets from your reign, as the grantor. It also cannot be modified or altered once it is created. And so, the assets tied to this trust may be invisible to potential creditors and lawsuits, allowing them to go directly to your grandchild.

Importantly, you may place up to $15,000 per year for five years, or up to $75,000 upfront, in your trust. These funds may avoid the annual gift tax all while making qualified transfers for the college tuition of your grandchild. Of note, you may send money directly to your grandchild’s educational institution and your grandchild themself.

As an example, say that your grandchild’s college tuition for the year is $10,000 and you have placed $15,000 in the trust fund for that year. Well, you may send $10,000 to the institution and $5,000 or more to your grandchild all without combining them and incurring the annual gift tax.

What is an alternative option for funding my grandchild’s education?

It is worth mentioning that your grandchild can use the assets you place in the trust fund for a variety of expenses outside of their education. So if you want these funds to go strictly toward their college education, then you may want to think about establishing a 529 plan instead. Unlike an irrevocable trust fund, you may maintain control over these assets even after you place them in the account.

However, you must consider the possibility that your grandchild may, unfortunately, encounter hefty medical bills, legal fees, etc. in the future. This is why many prefer the flexibility of a trust fund. In the end, you must reflect on whether you trust your grandchild to use these funds wisely.

There are many more alternative estate planning tools and plans at your disposal. So you must take the initiative and reach out to a skilled Putnam County estate planning attorney at your earliest possible convenience. Our team at The Law Office of Andres D. Gil, PLLC will be happy to serve you.

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