If you want to create a trust fund for a beneficiary, understanding the best options for your needs is essential. For example, you may want to ensure your beneficiary has enough funds to cover their college tuition. As such, you may want to create a trust fund with that in mind. However, you may not know the benefits of a trust over a 529 plan. This blog explores why a trust fund is a great option and how a Rockland County trusts attorney can help you create an impenetrable plan.

What Kind of Trust Is Best to Pay for College Tuition?

If you want to create a plan to ensure your beneficiaries can pay for their college education, there are two standard options. The first is a 529 plan, which is an investment account to save for higher education. However, the alternative option offers significantly more flexibility. Setting up an irrevocable trust is an ideal option for many. It is essential to understand that, like any other trust, an irrevocable trust is managed by a person of the grantor’s choosing. This agent, the trustee, is responsible for managing and distributing assets according to the wishes of the creator.

An irrevocable trust is one that cannot be changed or terminated after it is created. It allows the creator to place $15,000 per five years into the fund at once, meaning there will be $75,000 guaranteed per beneficiary. Similarly, the funds in this trust are invisible to creditors, meaning this money will go to the intended recipient.

What Are the Benefits of Using an Irrevocable Trust?

As previously mentioned, one of the significant benefits of using an irrevocable trust over a 529 is flexibility. A 529 plan exclusively hold funds that can only be used for secondary education. With an irrevocable trust, however, those funds can be used to cover medical and other expenses if necessary.

Similarly, an irrevocable trust allows the trustee to transfer funds directly to the college or institution. As a result, you will not be subjected to the “gift tax” if the trustee then transfers funds to you. For example, if they pay $15,000 towards your tuition and then transfer an additional $5,000 to you, despite the fact the total amount of transfers is over the limit for the gift tax, you will not incur the additional fees as they are considered separate transfers.

If you are a beneficiary who recently came into money via an irrevocable fund or a creator looking to set one up, you will likely have many questions. Luckily, the Lauterback Law Firm can help. Our dedicated team of attorneys will help you navigate the complexities of estate planning so you can feel secure in your future. Contact us today to learn more about how we can help you.