Everyone should have an estate plan. There are so many benefits to making sure that your assets are all accounted for and protected, but one perk that tends to surprise our clients is how having an estate plan can make it easier to provide for their grandchild’s education expenses. There are many ways that you can use your assets to help your grandchildren, but which method works best for you can depend on a number of factors. It can be difficult to make a decision on how to move forward, but a Woodland Hills, California estate planning attorney could be of assistance.
Should I Use a Trust to Pay My Grandchild’s Education Expenses?
A trust is one popular method for paying a grandchild’s education expenses. There are a few different kinds that can be used effectively, including:
A minor’s trust: You can set up this trust for someone who is under 21 years of age. You can continue to fund it until they reach that age, and then they have the opportunity to withdraw the funds. These contributions are gifts, but your grandchild will not be charged tax on it unless they exceed a certain amount.
Grantor trusts: This kind of trust can be used for multiple grandchildren and any assets contributed to the trust are removed from your taxable estate. These trust donations can be considered taxable gifts though.
Crummey trusts: In this kind of trust, a beneficiary has a window when they are allowed to withdraw funds after a deposit has been made. A minor trust can also be converted into a Crummey trust when your grandchild reaches the age of 21.
Are There Other Ways to Pay for My Grandchild’s Education?
There are other ways to pay for your grandchild’s education if you do not feel like setting up a trust. You could:
- Make direct tuition payments when they are due
- Establish a 529 plan and continue to donate to it
- Start a Roth IRA and name your grandchild as a recipient
Why Should I Talk to an Estate Planning Lawyer?
We recommend talking to an estate planning lawyer for a few reasons. First, you need to know how much of an estate you actually have. You do not want to pay for your grandchildren’s expenses and end up leaving yourself with no assets to rely on. Another good reason to consult an attorney is because different methods of paying for your grandchild’s education expenses can have their own drawbacks and advantages.
A good example of this is how a trust can be seen as your grandchild’s asset. This means that it could have an impact when they apply for financial assistance. If they are expected to receive financial aid, this method of dealing with their expenses might not be ideal.
Contact Our Law Firm
If you are ready to learn more about how you can benefit from creating a comprehensive estate plan, contact the Law Offices of Yacoba Ann Feldman. We can help you protect your assets and we are ready to answer all of your questions.