When planning your estate, you’ll have a considerable number of decisions to make. However, you may know one thing – you want to help contribute to your grandchild’s education! It’s no secret that obtaining a college degree can be incredibly expensive, so you may feel inclined to prioritize their education. However, you may be unsure of the best way to leave these funds to your grandchild. If this reflects your circumstances, you’ll want to keep reading to learn more about your legal options and the importance of working with Tampa estate planning lawyers to help you determine the best course of action for your wishes.
What Kind of Estate Tools Can Cover Educational Expenses?
In general, you’ll find that there are three ways in which you can leave funds to help a grandchild pay for their college education. The first is to establish a 529 College Savings Plan. This is a state-sponsored plan that allows you to contribute to a tax-deferred savings account while making tax-free withdrawals for certain expenses.
The next option is a will. This is the option that most people are familiar with, as it is considered the most important estate planning document due to its place as the foundation of your plan. With a will, you can set aside a lump-sum portion of your estate to be used to pay for your grandchild’s education.
Finally, you can establish a trust fund, to house the money you would like to contribute toward your grandchild’s education. The funds will then be distributed to your grandchild in accordance with the terms and conditions of your trust fund by the trustee you’ve appointed to manage the trust.
What Are the Benefits of a Trust Fund Compared to Other Options?
In general, establishing a trust fund to help cover your grandchild’s educational expenses is often the preferred method, as it has several benefits when compared to creating a 529 or will to pay.
One of the primary reasons you may want to avoid using a will is that the assets held in this document will be subject to the probate process. This is the long and tedious process in which the probate court must validate the will and distribute the assets. As such, your grandchild may have delayed access to the funds you’ve left for them. Additionally, when you leave assets in a will, it means that your grandchild will inherit the entire sum upon your passing, meaning they may make unwise financial decisions due to their young age.
Many looking to contribute to their grandchild’s education with a 529 plan may be surprised to learn that these have limitations. For example, your grandchild, in the event of an emergency, would be unable to use the funds in this account to pay for medical expenses or the cost of living.
Establishing a trust fund, however, avoids probate, meaning your grandchild can have immediate access to the funds, while also ensuring that a trustee is in place to manage the funds. As such, the trustee would be responsible for distributing the money to your grandchild, which can help ensure that this money is used wisely.
As you can see, there are several important considerations you’ll need to make when determining how to pay for your grandchild’s educational expenses. That is why working with Stobie Family Law Group is in your best interest. Our team understands how difficult these matters can be, which is why we are here to help you. Contact us today to learn more.
