Educational trusts and estate planning

Parents and grandparents living in North Carolina are often concerned about the cost of higher education. These individuals often seek out ways to begin saving and investing early so that their children and grandchildren will be able to pursue their educational goals and not graduate with burdensome debt.

One savings option that is commonly used is a 529 plan, an educational investment account that offers attractive tax benefits to the contributor. While these plans can be a wise move for many middle and working-class families, there are some drawbacks. The first is that there are limits to the contributions that can be made to these accounts. Secondly, the funds can only be withdrawn for educational purposes, which may not always meet the needs of the beneficiaries.

Couples and individuals with high assets may instead decide to set up an irrevocable trust with the child or grandchild as a beneficiary while paying tuition costs directly to a trade school, community college, or university. Unlike 529 plans, there are fewer restrictions placed on how the funds in the trust can be invested, possibly maximizing their value. In addition to tax benefits, the trust allows the beneficiary flexibility in use of the funds. Not everyone plans to go to university and some may be better off in using the trust to finance a small business or to buy real estate.

Individuals and couples who are considering setting up these types of accounts may benefit from speaking with an experienced attorney. It is important that educational trusts are drafted correctly.

No Comments

Leave a comment
Comment Information
Email Us For a Response
Orsbon & Fenninger, LLP - Estate Planning

Talk With Us: Schedule A Consultation

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Office Location

Orsbon & Fenninger, LLP
4201 Congress St.
Suite 110
Charlotte, NC 28209

Toll Free: 888-314-8134
Phone: 704-900-3883
Fax: 704-556-9601
Map & Directions

Office Hours: Monday : 8:30am–5pm Tuesday : 8:30am–5pm Wednesday : 8:30am–5pm Thursday : 8:30am–5pm Friday : 8:30am–5pm