Education Trust Fund Issues

[risky4me]

  Many years ago my sister died and I became a trustee of funds she left her granddaughter to be used for her education(and if not used for education, to be turned over to her later in life). It's not a huge sum of money(approx. 50K).
  Now that she is starting college I'm finding that having this asset, which must be declared on her financial aid application, will likely hurt her chances of getting financial aid. I had intended to use other resources to pay for her education so that she could benefit from the trust fund later in life. Besides the moral issue that aid should be for those without family resources, it would have better not to put this money in an education trust fund and internally earmarked it for her use allowing her to either use for education or hold it for later. Now it seems best to 'burn through' her education trust fund so she may qualify for aid later in her studies. Any folks out there have similar experiences and/or suggestions on the best way to put money away for children's future?

[Cranky]

It seems like a good idea to use money set aside for education for education, so I’m not sure I see a problem.

[risky4me]

In our case, there are other family members wanting to help her pay for her education. Had this trust not been established and the money were kept in a savings account rather than in a trust, it could be given to her later in life. Frankly, I would have preferred the granddaughter not even know about the money until later in life, but kids applying for college need to be advised of any assets of this type when they fill out financial aid forms.
If you wanted to establish a fund to be available to multiple kids of future generations where a portion of that fund might be available to a kid, without requiring them to be aware of its existence nor having to declare it as an asset - what would be a clean way to set it up?

[protostache]

You are the trustee of a trust funded specifically to pay for the beneficiary's education. You have a fiduciary duty to use the money for the trust's purpose. You don't get a say in the matter.

[protostache]

In our case, there are other family members wanting to help her pay for her education.

They can help after the trust runs out. They can also help now, if you want to spread the trust out over the beneficiary's entire education. That won't change the EFC calculation, as far as I know.

[ixtap]

So, let the other family members contribute and the trust fund fills in the gap.

You seem pissed that she isn't eligible for programs aimed at people without resources. I see a kid who is blessed with multiple resources.

[risky4me]

You are the trustee of a trust funded specifically to pay for the beneficiary's education. You have a fiduciary duty to use the money for the trust's purpose. You don't get a say in the matter.

Exactly. I am trying to figure out the best way to set money aside for future, multiple beneficiaries in a way that doesn't require declaring its value to any one kid. If you had $500k and you wanted to have the freedom to help various beneficiaries with a portion of that money, without them having to know the amount of the fund. Maybe something similar to a scholarship fund.

[frugalmom]

There is an entire industry focused on this very issue.

This type of question is not a hypothetical one size fits all families. 

For example if a person was a beneficiary of a trust, but the trust stipulated the person was not able to be granted access until they were 30.  The trust assets would not be calculated for financial aid.

If your plan is to shelter money, you need to get with trust officers, tax and estate attorneys who know the most recent tricks. 

[Cranky]

This is a question for an estate/trust lawyer. I’m sure it can be done but I don’t think you can keep it secret for long (if you don’t want them to know about the money.)

I agree that you have to make it unusable for college if you don’t want it to be counted against f/a.