Legacy Planning For A Child Or Grandchild’s Education
You want to provide for your grandchild’s future education, but you are not sure what the best option is. There is a lot of misinformation out there. If you invest in a 529 Plan, does your grandchild have to attend school in Florida? Should you leave your grandchildren money in your will? What if they need money for college before you should pass away? Fortunately, there are several options for you to consider when saving for a child’s educational needs.
Using a Trust as a Savings Vehicle
Parents and relatives may create a revocable trust for college and education savings, in addition to investment in a 529 Plan. However, it is important that the trust contains language about how withdrawals can be made and who is a beneficiary. Grantors also need to consider whom they want to appoint as a trustee, and what happens to funds held in the trust in the event of their passing or the beneficiary’s passing. A revocable trust can be designed so that assets are protected from outside sources, taxes or early withdrawal penalties.
Many families save for college by stockpiling funds in savings accounts, tying up money in volatile investment accounts, or utilizing a certified deposit account with dismal returns. While none of those options are incorrect, creating a revocable trust avoids the need to pay banking or investment withdrawal or maintenance fees, and fiduciary assets held in the trust can still grow. Establishing a revocable trust also guarantees that your beneficiary cannot spend hard-earned funds on a one-time purchase or a vacation. You decide the terms and the language and set conditions on when and if money can be distributed, such as directly to an educational institution to pay a tuition bill. Creating a college savings plan now protects your beneficiary’s educational and professional future and might prevent unnecessary borrowing later in life at high interest rates.
Florida 529 Savings & Prepaid Plans
Florida 529 Plans are tax-free savings plans that allow parents and relatives to contribute as little as $25 per month towards a child’s future education. Parents can utilize saved funds towards K-12 education expenses (such as tuition at a private high school) as well as for college. 529 Plans are flexible because saved funds can be used at private or public colleges across the country; there is no requirement that a student attend an in-state Florida college to use money held in the 529 Plan. Even if a child does not attend college or use the funds for private K-12 schooling, the balance of the plan can be transferred to another family member, such as a younger sibling. The 529 Savings Plan differs from the Prepaid Plan in that Prepaid Plans lock in today’s tuition rate/prices for tomorrow’s enrollment. Parents can add to the Prepaid Plan on a monthly or lump sum basis and have the option to allow other relatives (like grandparents) to make a gift towards the Plan.
Call Millhorn Elder Law Planning Group Today
If you want to provide for your child or grandchild’s education but are not sure where to begin, or if you have questions about education trusts, call our estate planning attorneys at Millhorn Elder Law Planning Group. Conveniently located in the Villages, we represent clients throughout Central Florida with all estate planning and legacy planning needs. Call today to schedule a consultation.