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Setting up trusts for loved ones' educational needs

Many St. Paul youth are thrilled to be out of school for the summer season. While their minds may now focus on other activities, parents, grandparents and others may still be focused on their loved ones' school needs, particularly from the financial side of things.

Higher education can be extremely expensive, to the point of being cost prohibitive for some to attend college. As a result, many individuals have expressed a desire to help out their loved ones shoulder the financial burden of college.

What many may not know is that educational expenses can be a part of effective estate planning. Moreover, individuals can do far more than simply leaving money to loved ones through their will at their death.

Through trust planning, individuals can set up an educational trust to help pay the costs of higher learning. Different types of trusts are available, such as pot trusts or individual trusts.

Under the first of these methods, a trust is set up where all beneficiaries can draw from the trust. The downside is that those beneficiaries who attend higher-priced universities may draw much more than other beneficiaries, leaving the other beneficiaries not as much money for their needs, or at the very least, creating an imbalanced result.

Another method is an individual trust, which can be designed to accommodate a person's individual needs. For instance, the trust can be set up to apply to tuition, books, computers and room and board. This flexible approach can work great to meet the needs of both the person attending school, and the individual who is setting up the trust.

Source: NWI Times, "Estate planning: helping out with a loved one's education," Christopher Yugo, June 7, 2014

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