Leaving Money in a Will for Education
Provide for your child’s future by leaving money for education in your estate plan. Most parents don’t know how to leave money in a will for education because it requires the legal understanding of a licensed attorney. The estate planning process involves a deep understanding of state laws, proper procedures, and complex legal jargon.
Effective estate planning also benefits from an attorney’s acute awareness of potential pitfalls that could lead to unintended distributions of a client’s assets. At The TGQ Law Firm, our attorneys draw upon decades of estate planning experience to create wills and trusts that carry out our clients’ wishes. Let’s take a look at some of the options available to a testator or trustor.
Tailor Your Estate Plan for the Outcomes You Want
As the testator of your will and the trustor of your trust, you decide where your assets will go. You can even stipulate that funds only become available upon the satisfaction of certain conditions.
At The TGQ Law Firm, we work with our clients on the best way for them to leave money in a will for education. One of our primary focuses involves drafting estate plans that match the specific desires of our clients. If you’ve found yourself thinking about the educational futures of your loved ones, discover some of the most common estate planning options below.
Protect the financial future of your young beneficiaries by including standard HEMS language in your estate plan. Many professionally drafted wills and trusts in Michigan contain clauses that provide for the health, education, maintenance, and support of the named beneficiaries. Typically, a HEMS provision supports young beneficiaries until they mature enough to steward the total amount of funds allocated to them.
However, HEMS language can also provide long-term maintenance for beneficiaries with mental disabilities, mental health issues, or a track record of uncontrollable spending. When an estate plan includes HEMS verbiage, it limits the designated trustee’s power to disburse funds. A beneficiary will only receive funds required for medical care, educational pursuits, and basic needs.
Clients interested in leaving money for education should contact a reputable Michigan estate planning attorney to discuss the option of a general trust. In Michigan, a trust can arise:
- As a testamentary trust based on language contained in a will
- Via separate estate planning documents
- Constructively as determined by the courts
Within the legal field of wills and trusts, attorneys create trusts via wills and separate estate planning documents.
Many Michigan residents choose to draft both a will and a trust. In such cases, the trust serves as the primary estate planning document that contains most of the trustor’s assets. The will, sometimes referred to as a pour-over will, stipulates that any assets not already contained in the trust will pour over into said trust upon the death of the testator.
The benefits of the above arrangement include:
- Fewer delays in asset distribution
- Avoidance of lengthy probate court cases
- Savings on expensive court costs and attorney fees
Attach a 529 To Your Estate Plan or Other Investment Products Like Life Insurance
Enjoy significant tax savings by attaching a 529 education savings account to your estate plan. Clients can avoid taxes on trust income by opening a 529 account in the name of their trust. Alternatively, clients can name their trust as a contributor to a 529 plan. The benefit of either option relates to the fact that a 529’s income remains tax-free.
As long as the 529 funds disbursed to beneficiaries go towards education, the IRS will not assess a tax. However, if the beneficiary uses 529 distributions for non-educational purposes, a tax liability will arise.
Including a life insurance policy as part of the trust estate can give a client more control over what happens with the funds. When left outside the trust, the beneficiary enjoys complete discretion on using the life insurance proceeds. However, when a trust holds the life insurance policy, the use of any benefits remains subject to the terms of the trust.
Estate Planning Attorney Ann Arbor, MI | The TGQ Law Firm
While most clients see estate planning as a concern for senior citizens, anyone with assets and an intended beneficiary should seriously consider a professional estate plan drafted by an attorney.
Disclaimer: This article is not intended to be legal advice. Everyone’s situation is different and legal advice is only properly given after having reviewed your specific situation.