Paying for education can be one of the biggest financial challenges a family faces, but planning ahead makes a difference. An educational trust allows you to set aside money for a child, grandchild, or other loved one to help pay for their schooling. Whether you want to cover private school, college, or graduate studies, this type of trust gives you a way to provide meaningful support with built-in protections and structure.
At Surprenant, Beneski & Nunes, P.C., we help families throughout Massachusetts create educational trusts tailored to their goals and values.
How Educational Trusts Work
An educational trust is a legal arrangement where one person (the grantor) places money or assets into a trust to be used for someone else’s education. A trustee—someone you appoint—manages those funds and distributes them according to your instructions.
These trusts can be structured to cover a wide range of educational costs, including:
- Tuition and enrollment fees
- Books and supplies
- Room and board
- Technology and transportation expenses
You can decide what level of education the trust will support, such as K-12 private school, undergraduate programs, trade schools, or advanced degrees. The trust may also include guidelines about what qualifies as an acceptable use of the funds.
Funding the Trust: Strategies That Fit Your Goals
You can fund an educational trust in several ways. Some families prefer to contribute a lump sum, while others choose to add funds over time. Common funding strategies include:
- Cash or investment transfers
- Gifts of appreciated stock
- Life insurance policies with the trust named as a beneficiary
When we work with you to set up a trust, we’ll look at your financial picture and help you project the cost of education based on your goals. That way, the trust is well-prepared to cover the expected expenses, and possibly grow over time.
Tax Considerations to Keep in Mind
Educational trusts can offer tax advantages, especially when planned in coordination with your overall estate. Contributions may qualify for the annual gift tax exclusion, and the assets in the trust can be removed from your taxable estate.
That said, income generated by the trust may be subject to taxes, depending on how distributions are made and how the trust is structured. We can explain how different approaches compare, including 529 plans or Uniform Transfers to Minors Act (UTMA) accounts.
Distribution Rules and Trustee Discretion
When you set up an educational trust, you choose how and when distributions are made. Some families allow the trustee broad discretion, while others prefer more defined rules. Common provisions include:
- Requiring that the student attend an accredited institution
- Maintaining a minimum GPA or academic standing
- Using funds only for tuition, books, or related costs
The trustee plays a key role in ensuring that the trust is used as intended. That person is responsible for managing the assets, keeping records, and approving distributions. If you prefer, a professional trustee can handle those responsibilities.
Flexibility and Limitations of Educational Trusts
Educational trusts offer a great deal of flexibility, but they’re not one-size-fits-all. Some limitations may apply, depending on how the trust is written. For example, if the named beneficiary decides not to pursue further education, you’ll need a plan for what happens next. You may allow the trustee to transfer the funds to another family member or convert the trust for a different purpose.
We’ll work with you to include fallback options and ensure that the trust reflects your wishes, even if circumstances change.
Contact an Experienced Southeastern MA Educational Trusts Attorney
Education is one of the greatest gifts you can give. With thoughtful planning, an educational trust can open doors and ease financial stress for the people you care about most. It’s a way to pass on more than money—it’s a way to invest in their future.
If you’d like to explore whether an educational trust is right for your family, contact us. At Surprenant, Beneski & Nunes, P.C., we’ll guide you through the process and help you put a plan in place that honors your values and supports your goals.