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You may have extra funds that you want to use to support your grandchild’s higher education expenses. You may make payments directly to the institution, but this may only cover tuition and not room and board, textbooks, etc. What’s more, you may run the risk of having these recurring payments come to a screeching halt if you, unfortunately, pass on. For these reasons alone, it may be in your best interest to set up these funds in your estate plan. Follow along to find out how you can fund your grandchild’s education and how a proficient Broward County trust lawyer at The Probate Lawyers can guide you throughout.

How can I use my estate plan to fund my grandchild’s education?

Usually, grandparents will transfer their assets to an irrevocable trust, and name their grandchild as a beneficiary, as a means of funding their education. The positive to this trust is that it may be funded by using your annual gift tax exclusion, which can be as much as $15,000 per year. All the while, these assets will be protected from creditors and from being used for your long-term care bills.

You may want to take full advantage of your annual gift tax exclusion limit of $15,000 per year, even if you predict that your grandchild’s education is going to cost less than this. Of note, your grandchild may use their trust fund to financially support themselves in areas outside of education. For example, they may use it to pay for housing, medical bills, or any other life event they may encounter. And having these assets under the management of a trustee may ensure that they do not become reckless in their purchases.

What other types of trusts can I set up?

Aside from an irrevocable trust, you may consider setting up a Section 2503(c) minor’s trust. This type of trust qualifies for the annual gift tax exclusion, as well. This is so long as assets and income are paid to or on behalf of your grandchild before the age of 21. In addition, undistributed assets and income must be paid to your grandchild at the age of 21.

On the other hand, you may create a Crummey trust. This type of trust allows your contributed assets, and their future appreciation, to be used for college expenses and excluded from your taxable estate. With this, you must give your grandchild a brief window in which they may withdraw your contributions (i.e., 30 to 60 days’ notice).

In the end, there are several estate planning tactics at your disposal; the path you take is dependent on your current financial situation and overall what is in the best interest of your grandchild’s education. You must take the initiative and reach out to a competent Broward County estate lawyer at your earliest possible convenience. Our team at The Probate Lawyers will be happy to serve you.