Many people use an estate plan to set aside assets to fund an education for their descendants. Colorado residents can start planning for their loved ones’ education by completing certain legal documents.
Terms can be included in a will to detail how certain assets should be applied to the education expenses for grandchildren. However, one issue individuals will have to address is the form of their bequest.
A trust fund can be established to provide flexibility regarding the conditions and terms that the loved ones will have to meet. For people who want to use a single trust fund to hold the assets intended for their loved ones’ education, they can use a pot trust, which is a pot of funds from which beneficiaries can request funds. Using a pot trust is one of the simpler options for funding, but individuals who create this type of trust should take care with the terms they create if they want all of their beneficiaries to receive equal treatment.
Pot trusts can be used to make unequal distributions, which means that some beneficiaries may receive more funds from the trust than other beneficiaries. However, allowing unequal distributions can have unintended consequences, such as one beneficiary who is attending an expensive college receiving more of the funds than another beneficiary who is attending a college that is less expensive. A situation could also arise if there is are significant differences in ages between beneficiaries and the older beneficiaries exhaust most of the funds before the younger beneficiaries are able to attend college.
An estate planning attorney may offer advice regarding which legal documents should be used to ensure that the education of a client’s grandchildren will be funded. The attorney may assist with drafting the provisions of an education trust fund.