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What is an Educational Trust?

June 22, 2022

An educational trust is a kind of irrevocable trust specifically designed to pay for education expenses. There are many variations, but essentially, an educational trust involves the following:

  • A grantor transfers money or property into the trust for the purpose of funding.

  • The trust is created for people called beneficiaries. Beneficiaries benefit from the trust by having it finance their education.

  • The educational trust is managed by a trustee based on the specific terms set out in the trust.

  • Trustees give the trust funds—the property and/or money available in the trust—to the beneficiaries according to the terms of the trust.

What to Consider When Creating a Trust

There are a number of important factors to consider when setting up an educational trust. First, the grantor needs to consider what type of education the trust will pay for. Does a four-year college qualify? What about a trade school? Sometimes, children pursue unconventional career paths. It is helpful if a grantor provides direction on these particular matters in order to make the process easier for the trustee.

Second, the grantor should consider when to put the trust into effect. Depending on whether the trust is living or testamentary, different steps will need to be taken. A living educational trust is operational while the grantor is still alive. Living trusts are advantageous when the grantor feels that beneficiaries will need the funds soon. Testamentary educational trusts, on the other hand, take effect only after the grantor’s death. For instance, such a trust may be ideal when the beneficiary is a child, and the grantor is almost at the end of their life and the beneficiary won’t be needing the trust funds until after the grantor has passed away.

Finally, the grantor must also consider who the trustee should be. As an educational trust is overseen by the trustee—who ensures that the trust is used for educational purposes—the trustee should be someone who inspires confidence. The grantor should consider these questions and concerns with the help of an estate planning attorney.

Benefits of an Educational Trust

Like any trust, there are numerous benefits to setting up an educational trust, including:

  • The knowledge that your inheritance is utilized for a virtuous purpose

  • Your family is released from the burden of saving for education, including college debt

  • Assets will not be used wastefully

How an Attorney Can Help

An experienced lawyer can help you set up an educational trust and help trustees distribute assets out of an educational trust. You deserve a customized plan that will best serve you, your family, and future generations. An attorney can help educate and empower you in the creation of a well-rounded estate plan that includes wills, trusts, and other tools. Click here to Schedule a FREE Virtual Estate Planning Session. We will guide you through the entire process and help you understand what needs to be done to ensure your loved ones are taken care of.


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