Setting money aside for your children's or grandchildren's education is a great way to provide for their future. However, it is possible that not all of the money you have set aside will be used for college expenses. For example, your child may receive a large scholarship and will not need to use all the money you have saved, or your grandchild may choose a trade school that is less costly than you expected. Alternatively, your child or grandchild may decide to join the workforce immediately upon graduation. When confronted with this scenario, you may wonder what you can do with the excess money. The answer depends on how the money is managed.
Trusts Created by You
Health education exclusion trust. The purpose of a health education exclusion trust is to provide for the education and medical needs of multiple beneficiaries over more than one generation (typically grandchildren and great-grandchildren), and if money is left over because one beneficiary did not need all of it, it will not affect the operation of the trust. For example, a different beneficiary may decide to go to medical school and thus utilize the perceived excess.
Irrevocable gifting trust. If you work with an experienced estate planning attorney when creating an irrevocable gifting trust, your attorney can help you include instructions for how the trustee should handle the remaining funds if the beneficiaries do not need them. You are free to include instructions in the trust document that allow the beneficiary to use the remaining funds to purchase a house, start a business, or save as a nest egg for retirement. Alternatively, you could name a different beneficiary (e.g., a family member, friend, or charity) to receive the remaining amount.
Revocable Living Trust. Like a revocable living trust, a revocable education trust can also be changed up until your death or incapacity. Because the funds held by the trust will likely be distributed during your lifetime, you can amend or revoke the trust if your or the beneficiary's life circumstances change. You can add or remove beneficiaries, transfer money to or withdraw money from the trust, or create a different set of criteria for making distributions to the beneficiaries.
Accounts Created by Statue