Last updated on October 31st, 2018
Forming an Education Trust
An education trust is formed with the intention of funding the academic pursuits of your beneficiaries. When forming your trust, you must indicate that the assets of the trust are intended to be used for educational purposes only. You must name your trustee, beneficiary/beneficiaries, and how trust assets are used.
In other words, you must lay out the terms in which your trust principle can be spent by your beneficiaries.
The trust becomes effective once assets are transferred into the trust, unless otherwise indicated by the trust documents. If the trust is scheduled to become operational following your death, your assets are not transferred until you are deceased. Once in effect, your trustee controls your trust property, and distributes assets to your beneficiaries in accordance with your designations.
Keep in mind that an education trust is not the same as a state regulated College Savings Plan. You are directly providing the funds of your education trust, rather than investing in an account that accrues educational funding.
Transferring Property into an Education Trust
As previously stated, you are able to fund the trust immediately. Doing this allows the trust to become effect during your lifetime. However, should you decide that the trust becomes active following your death, you must designate funds from your estate to be immediately transferred on death.
The “funds” of your trust are the properties available to your beneficiaries that are intended to be spent towards their educational pursuits.
Untitled property is transferred to the trust when included in the list of trust property for your trust. Titled property must be transferred to the ownership of the trust by changing title ownership of the property to that of the trust. Property must be properly transferred to your trust in order to be considered a fund of the trust.
Adding Property to Your Education Trust
Once your education trust is funded, you cannot revoke funds from the trust. However, you are able to contribute additional funds and property to the trust at any time. Untitled property is added by amending the trust property list to include the acquired property. Titled property must be transferred by changing the title ownership of the property over to the trust.
Remember, you are only able to contribute property that you own outright. Property that you are not the title owner of, or that you do not have complete ownership of, cannot be transferred into the trust.
Forming an education trust is a great way to fund a loved one’s future, but you need to plan carefully in order to be successful. Transferring your property into the ownership of a legally binding entity takes careful planning and consideration.
Schedule a consultation with our estate planning attorney to establish an education trust.