Trusts
Setting up a trust is a flexible way to invest in a child's education. You can set up any type of trust for this purpose using property or funds, which will benefit the child at a later date.
How They Work
You gift property for a child in a trust to be used for education or other purposes. Certain restrictions can be placed on the property by limiting the child's access until he or she reaches a specific age (usually 18 or 21).How They Can Be Used
The way the money can be used by the trustee depends upon the language of the trust.Benefits
- Taxes – Once the trust transfers ownership to the beneficiary of the trust (usually at age 18 or 21, as determined by the language of the trust) the property is no longer included in your taxable estate (subject to IRS guidelines).
- Flexibility – Anyone can set up a trust for any child and the contribution amount per year is unlimited. You can invest one lump sum or make periodic payments.
Considerations
- Taxes – Contributions are considered "gifts" for tax purposes. However, investment earnings are taxable to the trust, potentially at a higher rate than what applies to individuals, unless distributed to the beneficiary of the trust.
- Control – If certain types of trusts are used, the child will have full control of the trust assets at the age of majority.
Contact an attorney to see if a trust is right for you.
Thrivent Financial for Lutherans and its respective associates and employees cannot provide legal, accounting, or tax advice or services. Work with your Thrivent Financial representative, and as appropriate your attorney and/or tax professional for additional information.
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