Nevada residents may worry about the future costs of education for their children or grandchildren, and some may choose to use instruments such as 529 savings plans to ensure that funds are set aside to address these needs. However, others might consider developing educational trusts to manage funds that are intended for helping beneficiaries to meet academic goals. There are some excellent benefits to be enjoyed by creating an educational trust, but there can also be some pitfalls, which makes it important to carefully plan.
While a 529 plan is created for one person, an educational trust can be designed to accommodate one or more beneficiaries. In fact, such a trust could be designed to address the collegiate costs of existing beneficiaries such as grandchildren, and it could be designed to further meet the needs of potential beneficiaries in future generations. This might be viewed as an excellent tool for ensuring that the settlor’s educational interests are promoted among those recipients. In both 529 and trust scenarios, funds that are specifically designated to pay for educational costs might not be accessible for other situations.
A general trust could be used to fund the educations of the settlor’s descendants as well. Specific details in the trust could define the options, which might include traditional higher education paths or non-traditional areas and means of study. Any trust, including an education trust, should include language that allows for an escape in case of major changes in tax rules or in life circumstances.
Because there are varied ways to set aside funds for education in one’s estate plan, it can be helpful to discuss this area of interest with an estate planning lawyer. This allows the pros and cons of each type of plan to be evaluated in light of one’s personal financial situation.