Term-of-Years Trusts and Grandchildren
There are many government-sponsored ways to help with college expenses, but what if grandparents want to provide more? It’s possible to combine financial support for grandchildren with a gift to charity, through a term-of-years charitable remainder trust. Trusts can last for up to 20 years, which could allow for grandchildren of varying ages to finish college and even get started in a career.
Take the case of Marie, who has four grandchildren, ages 9, 13, 14 and her oldest, age 18, who is ready for college. She could fund a charitable remainder trust with “sprinkling” powers that allow the independent trustee to give income to the grandchildren as they enter college. When the trust ends in 20 years, the remainder passes to the charity named by Marie.
The advantages of a term-of-years remainder trust over other savings plans for college:
- The trust can be funded with appreciated securities, avoiding capital gains tax;
- One trust can benefit all the grandchildren, rather than separate accounts for each;
- The trust payments can be used for extras — travel, clothes, a car, food — not provided for under some savings plans;
- An income tax charitable deduction when the trust is created;
- The satisfaction of knowing the remainder will pass to a favorite organization.
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