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I am in the fortunate position of cashing out a bunch of company stock to become a "thousand-aire". I would like to use some of the money to create a trust fund or something like that for a 10yr old girl I mentor so she can go to college - her family could never afford to send her. How much should I give - assuming this is an 8 year investment till she needs the money? Does anyone know how this is done or have suggestions on the best way to set it up? I don't want her to use it until she's of age and I also want to make sure it's used only for education expenses.

Thanks!
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No. of Recommendations: 1
You may be better off keeping the money in your name, rather than the child's. Perhaps you can tell the family that you have earmarked so many dollars in a separate account that you will invest and use to pay for the girl's college education.

Several reasons:

1) If this girl's parents have no money then she should qualify for lots of financial aid. You can then cover whatever the financial aid doesn't. (If you give her the money now, it will be counted as her assets and she will get much less aid.) For instance, if she qualifies for a lot of loans, then you could give her money so she doesn't have to take them. By the way, money spent on college tuition isn't subject to the annual $10,000 gift tax limitation.

2) You will have complete control of the money.

It seems to be relatively hard to set up a trust where you control how the money is spent. One method is called a "Crummey trust", but it's fairly complicated. You will need to hire a lawyer to set it up; this can be expensive.
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No. of Recommendations: 2
I am in the fortunate position of cashing out a bunch of company stock to become a "thousand-aire". I would like to use some of the money to create a trust fund or something like that for a 10yr old girl I mentor so she can go to college - her family could never afford to send her. How much should I give - assuming this is an 8 year investment till she needs the money? Does anyone know how this is done or have suggestions on the best way to set it up? I don't want her to use it until she's of age and I also want to make sure it's used only for education expenses.

Here's another idea for you: invest the money in a section 529 plan (also called a "qualified state tuition plan") with the child as the beneficiary. Most states offer such a plan. This will give you control of the money, which will grow tax-deferred until it is withdrawn. (If you pick a plan from a state other than the one you live in, you may have to pay state income tax on the returns.) If the money is not used for higher education expenses of the beneficiary, you can get the money back, but you'll have to pay a penalty (and in some cases forfeit your investment gains: read the fine print of your plan for details). And the money is not treated as an asset of the child, so it won't affect her financial aid.

See www.savingforcollege.com for a guide to these plans.
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