Author Topic: Trust Funds for Kids Education  (Read 2825 times)

risky4me

  • 5 O'Clock Shadow
  • *
  • Posts: 97
Trust Funds for Kids Education
« on: February 04, 2017, 11:16:28 AM »
Being a trustee for child can be complicated in that you want this money to perform well for the benefit of the child, but conventional wisdom is that a trustee's main responsibility to safeguard the money for the future, not achieve maximum growth. I am a trustee for a 16 year old minor who will be attending college in the next few years and would appreciate any advice on allocations and general approaches.

GizmoTX

  • Handlebar Stache
  • *****
  • Posts: 1450
Re: Trust Funds for Kids Education
« Reply #1 on: February 04, 2017, 11:43:29 AM »
How large is the trust?

Livewell

  • Stubble
  • **
  • Posts: 179
  • Location: SF Bay Area
Re: Trust Funds for Kids Education
« Reply #2 on: February 04, 2017, 12:29:01 PM »
I would generally say since the money is needed more near term (a few years) you should be more conservative (more bonds/cd/cash, less/limited stocks).

For example Vanguards 2020 target retirement fund is 56/44 (stocks/bonds).

For me, given what the trust money is being used for and your role as trustee, I would be more conservative.  Other considerations that come to mind are how much is in the fund and where the 16 year old is thinking about going, whether you want money left over and if grad school might be in their future.



« Last Edit: February 04, 2017, 12:31:55 PM by Livewell »

risky4me

  • 5 O'Clock Shadow
  • *
  • Posts: 97
Re: Trust Funds for Kids Education
« Reply #3 on: February 04, 2017, 09:06:42 PM »
How large is the trust?
Trust Assets-
$45K in Vanguard
$40K left on 8% note paying $500/month

In the process of adding another 60-80K.

She is looking at mid-range stuff, she may have some other help but I was figuring 20K/yr min. from the Trust.


maizefolk

  • Walrus Stache
  • *******
  • Posts: 7400
Re: Trust Funds for Kids Education
« Reply #4 on: February 04, 2017, 09:24:55 PM »
Being a trustee for child can be complicated in that you want this money to perform well for the benefit of the child, but conventional wisdom is that a trustee's main responsibility to safeguard the money for the future, not achieve maximum growth.

Also keep in mind your incentives as the trustee. If you are a little more conservative than is ideal and there is a little less money in the trust, no one is going to think twice about it. If you take even a justifiable decision and have appallingly bad luck that results in a significant negative return, it could damage family relationships.

GizmoTX

  • Handlebar Stache
  • *****
  • Posts: 1450
Re: Trust Funds for Kids Education
« Reply #5 on: February 05, 2017, 07:38:28 AM »
Being a trustee for child can be complicated in that you want this money to perform well for the benefit of the child, but conventional wisdom is that a trustee's main responsibility to safeguard the money for the future, not achieve maximum growth.

Also keep in mind your incentives as the trustee. If you are a little more conservative than is ideal and there is a little less money in the trust, no one is going to think twice about it. If you take even a justifiable decision and have appallingly bad luck that results in a significant negative return, it could damage family relationships.

I agree -- with just 2 years to go to start funding college, your role is money conservation, not growth. The market is overdue for a major correction or bear market, & you can't take the risk of any loss with so little time to regroup. I'd ladder certificates of deposit paying at least 2% from online banks like Ally, Synchrony, CIT. I'd aim for the trust to pay out no more than 25% of the funds each year, & then pay directly to the university. The beneficiary needs to know this & be prepared to cover any shortage by working (summers) & getting a student loan only as a last resort. These days summer internships after the sophomore year are crucial for hiring post-degree & provide valuable experience to the student about what s/he really wants or doesn't want as well as employee skills & funds. Part time work during the school year should be avoided in favor of the highest GPA possible & until the student feels confident to be able to do both. DS started tutoring in calculus his sophomore year starting at $25/hr. He was selected as a junior to be an undergrad teaching assistant for a first year engineering design course that paid $12/hr for 10 hours/week, & he loved the work. As a graduate TA, it's now paying all his grad school tuition & fees plus a stipend.

risky4me

  • 5 O'Clock Shadow
  • *
  • Posts: 97
Re: Trust Funds for Kids Education
« Reply #6 on: February 06, 2017, 02:46:20 PM »
Appreciate everyone's input. This is what I changed-

exchanged VCVSX,VEMAX,VIPSX,VGTSX to VBILX about 30K

left one third of total in VWELX  about 15K( still willing to have a smaller portion less conservative)
future additions to the account likely to be made to the VBILX

Thanks again for the great responses- it is very helpful to have these ideas/suggestions.
I am fairly aggressive with my own accounts, but managing money for someone else is much harder!