Setting up an educational trust in Washington is more complicated than people often realize. Even though many parents and grandparents want to help their loved ones pay for their education, finding the best financial vehicle can be a confusing and challenging process. Those who are interested in establishing an educational trust should spend some time exploring all of their options before signing any legal documents.
There are many different trusts and savings plans to choose from, and each option has its own pros and cons. With a pot trust, the benefactor will put money in a single account that all of their beneficiaries have access to. When a beneficiary needs to pay for their education, they will formally request funds from that account. Unfortunately, that type of account can result in an unequal distribution of money if a beneficiary pulls too much out.
For those who are interested in being as fair as possible, a separate trust could be a better option. With one of those trusts, each beneficiary receives a set amount of money. The biggest drawback of a separate trust is the fact that some beneficiaries might not be able to pay for all of their educational expenses while others will have excess funds in their accounts when they are done with school. Another option that some benefactors choose is a 529 educational plan, but those accounts are heavily regulated by the federal government.
Anyone who is considering setting up an educational trust should contact an attorney who has experience with estate planning. Many benefactors don't realize just how much money is lost to taxes and fees if they aren't careful, and that is why it is so important to work with a lawyer who understands how these complex financial instruments work.