Family Education Trusts: Leave a Lasting Legacy For Your Heirs

It is an important—and honorable—objective to provide for the educational needs for your children, grandchildren, and even future generations. One option that can be used to achieve that objective is a 529 plan. A 529 plan can be “a highly effective tool for funding tuition and other educational expenses on a tax-advantaged basis.” 

However, after death, there’s no guarantee that subsequent plan owners will continue to use it to achieve the objectives of the original owners. One alternative would be to create a family education trust that invests in a 529 plan. 

529 plans allow parents to make substantial, nondeductible constitutions up to and over $400,000 depending on the plan. 529 plans can be used to pay for tuition, books, fees, supplies, equipment, and room and board at most accredited colleges and universities and certain vocational schools. 529 plans may also be used to pay up to $10,000 per year per student for elementary and secondary school tuition.

Owner’s can also have control over “the timing of distributions, can change beneficiaries from one family member to another and can roll the funds over into another state’s plan tax-free.” 

Given the disadvantages of 529 plans, like the inability to invest assets other than cash, it could be beneficial to establish a family education trust to hold one or more 529 plans. 

See David T. Riedel, Family Education Trusts: Leave a Lasting Legacy For Your Heirs, Adler, Pollock, & Sheehan P.C., September 7, 2021. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

https://lawprofessors.typepad.com/trusts_estates_prof/2021/09/family-education-trusts-leave-a-lasting-legacy-for-your-heirs.html