When considering one’s estate plan, many in New Jersey fail to recognize the flexibility that is available in determining how their assets can be put to use by future heirs. A great deal of customization is available when it comes to estate planning, and it is possible to set aside certain assets for specific purposes. Funding a loved one’s education is one such purpose, and there are a number of ways that this goal can be met.
A great way to assist with the cost of education involves creating a trust that exists solely for that purpose. If there is only one heir who will be the recipient of these funds, an individual trust is the best way to go. This type of trust allows the creator to determine how much money will be made available, and what specific conditions must be met in order for the heir to make use of the money. For example, it is possible to place conditions within the trust that require good attendance or maintaining a certain GPA.
If there will be more than one heir, individuals can create multiple individual trusts, or set up a pot trust. A pot trust is one in which all of the designated assets are deposited, for the use of multiple heirs when the time comes to attend college. One drawback of a pot trust is the risk that most or all of the money will be used by the older recipients, leaving very little left for those who head to college later.
No matter which type of education trust is designed, it is important to decide what will be done with the money if an heir does not attend college. Some may consider releasing the funds if a child enters the armed forces or pursues a technical training program. Others will outline that the funds are to be released to another party or entity if not used for the purposes of higher education. Educational trusts are just another example of how estate planning can be customized to suit the needs of any New Jersey resident.
Source: nwitimes.com, “ESTATE PLANNING: Helping out with a loved one’s education“, Christopher Yugo, June 7, 2014