November 13, 2018

Often grandparents are the ones asking questions about whether or not to use an educational trust. This raises further questions about whether or not one fund should be set that all of them are eligible to tap into or individual funds for each person. 

Planning for a loved one’s education is an important contribution that you might be interested in making, but the most difficult part of this process is determining what form that bequest will take.

A trust is a great option for passing on benefits for future education. There are many different types of trusts and some of them offer flexibility regarding the conditions and terms that the loved ones need to meet in order to get the benefit of the assets placed inside the trust. If you want to establish one trust fund, this could come in the form of a pool of money that each beneficiary is entitled to request funds from.

This seems like a simple option but should never be created without careful planning because if you intend for all of the beneficiaries to be treated equally, you’ll need to establish clear terms. One beneficiary might attend a more expensive university than another.

Furthermore, if there are wide age differences between the beneficiaries, then the younger beneficiary could discover that the older ones used up the majority of the trust before the younger ones even had a chance to make it to the application stage of college. A separate trust for each of the beneficiaries is another option, but this is not without its downsides.

Individual trusts do make it easier for equal treatment because each beneficiary’s trust would get the same amount of money, but the separate trust might not be enough to meet your goals. Someone who chooses a less expensive education will have excess funds inside their trust, whereas, someone who pursues a more expensive option will run out too quickly.