You may have many questions if you discover you’ve been named the beneficiary of a trust. Whether you’re unsure what you can use the money for or how to access it, this can be a complex question. One of the main appeals of a trust fund can be whether or not you’re eligible to use it to pay for your college tuition. Keep reading to learn more and discover how a Woodland Hills trust attorney can help you navigate any questions you might have if you’ve recently come into money from a trust fund.
What Kind of Trust Fund Can I Use to Pay for My College Tuition?
In general, if you are the beneficiary of an irrevocable trust, you will likely be able to use the funds for your college education. An irrevocable trust protects the assets inside from creditors. This is because the trust cannot be changed, and thus the funds become hidden from the creator’s creditors and any potential lawsuits that may arise. As a result, the funds are almost guaranteed to go to the beneficiaries named in the will.
Similarly, the assets placed in an irrevocable trust may go towards the creator’s healthcare expenses, if necessary. However, five years after the creation of the trust, these assets are ineligible for healthcare, meaning they are guaranteed to the beneficiary.
If you are the beneficiary of an irrevocable trust, you can use the money you receive to pay for college. This includes an annual exclusion of up to $17,000 annually if the gift is given in 2023 and the trustee or manager of the trust, can transfer the money directly to the educational institution. Because you will not come into possession of the money, the funds will no longer count toward your annual exclusion gift. As a result, there is no gift tax.
Are There Benefits to Using a Fund?
One of the significant benefits of using an irrevocable trust to pay tuition is the fact that a trust can be structured to receive funds outside of your education. This can help cover medical expenses and insurance. Similarly, if you do not use all the funds allocated towards your tuition, they will remain housed in the trust. As such, these funds will remain protected from creditors, divorce, and unhealthy spending habits.
If you’ve been named the beneficiary of an irrevocable trust, using it to cover tuition and other college expenses is a great way to utilize these funds.
When you have questions, the Law Offices of Yacoba Ann Feldman can help. Our dedicated legal team can help you navigate any questions you might have about your trust or set one up to help protect your loved ones. Contact us today to learn more about how we can help you.