How an Estate Plan Can Help Pay for College
Investing in Their Future—Even If You’re Not There
For many families, one of the most important goals in estate planning is making sure children and grandchildren have the financial support they need to pursue higher education. With the rising cost of college, planning ahead can make the difference between opportunity and burden. A properly structured estate plan can serve as both a legacy and a financial safety net—ensuring your wishes are carried out and your loved ones are supported, even if life takes an unexpected turn.
Using Trusts to Fund Education
One of the most effective tools for paying for college through an estate plan is a trust. A
revocable living trust or irrevocable trust can be tailored to set aside funds specifically for
education expenses. You determine how and when the money is used, giving you control even after you’re gone.
For example, you can direct that:
- Funds be used solely for tuition, books, housing, and related education expenses.
- Distributions occur only if the beneficiary maintains a certain GPA or attends an
accredited institution. - Funds are paid directly to the educational institution to assure they are used properly.
- Funds are disbursed in stages (e.g., 50% upon enrollment, 25% after two years, and the
remaining 25% at graduation).
This kind of structure encourages responsible use and allows you to reward educational progress while avoiding the risks of a lump-sum inheritance.
Keeping Kids on Track: Limiting Gaps and Delays
An estate plan can also be crafted to discourage children from taking extended time off from college. Trust provisions can specify that funds are only available while a student is continuously enrolled on a full-time basis. Taking a semester—or a year—off without good cause could pause or even forfeit access to educational funding.
This encourages students to stay focused, move through their program efficiently, and avoid the common trap of “drifting” away from completing a degree. If a beneficiary knows that taking a break could mean losing financial support, they are far more likely to stay motivated and committed to finishing.
Of course, you can still build in flexibility for legitimate reasons, such as medical emergencies or religious missions, but setting clear expectations upfront helps keep their momentum strong.
529 Plans as Part of the Estate Plan
While 529 college savings plans are not controlled by a trust, they can be integrated into your overall estate plan. These accounts grow tax-free and can be used for qualified education expenses. You can name a successor owner in your estate plan so the funds remain earmarked for the right person, even if the original account holder passes away.
You may also use your estate to fund a 529 plan directly, either during life or upon your death, while reducing the size of your taxable estate.
Naming a Trustee to Carry Out Your Wishes
If you set up a trust for education, it’s critical to name a trustee who will follow your wishes and administer the trust responsibly. This person or institution will manage the funds, oversee distributions, and make sure the rules of the trust are enforced. Choosing the right trustee ensures that your intent—to support a loved one’s education—is honored faithfully.
Estate Planning Isn’t Just for the Wealthy
You don’t need to be wealthy to include college planning in your estate plan. Even modest
savings, if managed wisely, can go a long way toward easing the financial strain of higher
education. An estate plan helps ensure that those funds are protected, preserved, and used for the purpose you intended.
A Final Word
If paying for a child’s or grandchild’s education is part of your legacy, an estate plan gives you the tools to make it happen—and to keep students on the path you envisioned for them. At Gibby Law Firm, we help families create thoughtful, customized plans that go beyond just passing on assets—we help clients invest in their loved ones’ futures.