Probate is all about planning for the future. What do you want to leave behind for your living heirs? What kind of legacy will they remember when they think of your name? It’s all up to you, but you have to make plans while you have the chance. One way of providing beneficiaries with an inheritance is to set up a trust.
A trust can be used to get around what would otherwise be a solid wall of taxes. It’s a fiduciary contract that allows a trustee to hold or manage money or other assets for your beneficiary. There are a number of different types of trusts that you can use to transfer wealth in a variety of ways. One such type of trust is an educational trust. Funds placed in this kind of a trust can only be used for education. The person who is transferring assets into the trust decides who will get the money and who will control it until that happens.
Often, the funds will only be funneled into the trust upon the death of the grantor. Or sometimes the grantor decides to transfer money immediately. You might do this if one of the beneficiaries was set to go to school soon. The trustee might be different from the beneficiary, and when the trust becomes operational the trustee is responsible for providing the required money to the beneficiary depending on the terms of the trust.
If you decide to set up an educational trust, there are a few questions you need to answer:
Will you set up the trust for one beneficiary? Multiple?
Who will be the trustee?
When will the trust go into effect?
What kind of education will the trust require? You determine any requirements the beneficiary might need to keep in mind. You can decide to offer the money only for a full-time legal student or you can support any education at all. Your choice.
When will the trust be terminated? You will need to determine what happens if there are remaining funds when the beneficiary completes an education. Then again, you’ll need to decide what happens if the beneficiary decides not to acquire an education. Will the money go to a new beneficiary if the first dies or is unable to complete the terms of the trust?
There are a number of options, and you must weigh them all before you can set up a reliable trust!