Education Trust
An educational trust specifies that trust funds are to be used for education.
In the trust document, the grantor names a trustee and beneficiaries, as well as stating how the trust money is to be used.
Educational trusts can be set up for children or grand-children.
What is a Grantor?
The person who transfers assets into the trust.
What is a Beneficiary?
The person who receives a benefit from the trust.
What is a Trustee?
The person who controls trust property according to the terms of the trust.
Can I Be a Beneficiary?
Yes, you can also be a beneficiary or you can be the sole beneficiary.
Education Trust Example
John is Paul’s father and the trustee is Ringo Trustees Pty. Ltd.
John is 32 years old and Paul is 6 years old.
John wants to set up an education fund for Paul to pay for university fees in the future.
The total average cost of studying in the UK is estimated to be at least £22,200 (~US$31,380) per year, with studying in London likely to be significantly more expensive. The average course is 3 or 4 years.
John wants to set up an education trust fund with 100,000 GBP which will mature in 10 years.
John is hoping the fund will grow at 7% p.a. which means the fund will double in 10 years.
If successful, the education trust will grow to 200,000 GBP by the time Paul reaches 16 years of age. At that time, Paul may need some money to pay for college at 16 – 18 years of age. Paul can draw an income if necessary from the trust.
How is the Education Trust Set Up?
John talks to his financial adviser and is introduced to Ringo Trustees Pty. Ltd. 100,000 pounds of John’s money is invested in an insurance bond held by the trust.
What Can an Education Trust invest in?
An education trust can invest in an insurance bond, also known as an insurance wrapper. The insurance bond holds all the assets and is usually set up in an offshore jurisdiction such as The Isle of Man or Mauritius for British expats.
The education trust can invest in:
- Direct equities / dividend yielding companies such as Coca Cola or tech shares such as Amazon & Google
- Equity funds such as JP Morgan or Vanguard funds
- Bond funds
- ETFs (Exchange Traded Funds)
- Collectibles such as Fine Art or Rare Stamps
- Commodities such as precious metals (gold, silver) or commodity funds
- Cash (usually to pay for the insurance bond fees)