Effect of trusts on financial aid?

carolyn
Tue, 12 Apr 2005 13:34:10 +0000

When they were infants, our children received an educational trust from their great grandmother so we have researched this quite a bit.
Unfortunately, the trust was set up in their names (irrevokable) and our understanding is that all of the money in the trust will have to be reported and counted on financial aid forms.

Schools will expect a higher contribution from the funds saved in the children’s name through the trust than they would if that money had been put in a savings account in our name.

The plus is - we have the money there to pay for undergrad in any case. The con is - since the money will be counted this way by schools, we will be using it all for undergraduate and there will probably not be any left for graduate or professional programs when getting financial aid is tougher.

Setting up a 509 college plan may be the best route to go instead of a separate trust fund if a grandparent wants to contribute money to college savings. A good tax advisor should be able to work the details out with you.