Law Offices of Roshni T. Desai
Long-term Planning For Orange County

Funding college with an educational trust

Sooner or later, California parents begin thinking about how they will pay for their child's college education. Some people may want to consider setting up an educational trust.

Although some people may think of a trust as a way to pass down a child's inheritance, there are many ways a trust can be used. According to Nolo, parents can set up an educational trust to fund their son or daughter's college education and specify that the funds are intended for educational purposes. However, they may want to consider if these funds should be used only for a four year university or if their child can use the money to pay for an online program or trade school.

Before parents set up their trust, it is important for them to do research. Zacks Investment Research says that sometimes a particular type of trust might determine whether a child is eligible for financial aid. People may want to ensure that their child can still receive financial aid, especially if their son or daughter will start college in a few years. Most of the time, it is best if people set up the educational trust many years before their child will attend college. This allows them to contribute a small amount each year and still amass enough money to pay for college. 

Parents should typically make sure their child knows all of the important information about this trust. Sometimes people may need to pay taxes on the trust if the money is used for something other than education. This can be important to understand if a child decides not to attend college or has money left in the trust after finishing school.

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