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Thu
26
Jun
2008

Trust for benefit of family members

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No votes yet
I was approached by a gentleman who would like to set up a trust or a scholarship with the college for the expressed purpose of funding his nephew's education. When I asked about the continuity of the fund after his nephew graduated, he alluded that he and his wife might want to take classes too! Is there any vehicle that would allow him to make this donation with a predetermined recipient of the scholarship (a family member, no less)? Thanks! Wayne Glass
Mon
30
Jun
2008
107
points
#4 by Kaitlyn Sands    

Trust for family scholarship

Hi Jason...this doesn't sound much like a charitable contribution...beware of donors who have ulterior motives for making donations to your organization other than for the benefit, work, and mission of your organization.

Mon
30
Jun
2008
117
points
#3 by john b. atkins    

Trust for family scholarship

The College Savings Plan, or 529 plan, is an appropriate vehicle to consider. The arrangement can be initiated by an aunt or uncle for a nephew. Funds in the 529 plan build, tax deferred, until needed for college related expenses. If so used, the earnings become tax exempt. However, if the 529 plan has funds remaining after the nephew either completes schooling or just discontinues education, then the aunt or uncle who started the 529 plan can withdraw the funds and use it for their education. If they withdraw the funds and use them for non-education purposes, there is a 10% excise tax upon the earnings withdrawn. There are other considerations, namely, gift tax, generation skipping tax that may have an impact depending on the dollars involved. Your client could call 888-993-3746 or www.planforcollegenow.com. for more information.

Mon
30
Jun
2008
101
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#2 by Maynard Lowry    

Control and distribution of college funds

According to Frank Minton a charitable gift annuity can transfer payments to a trust (which could be used to cover college costs). If a "college annuity" can be created (i.e. one that commutes lifetime payments into a shorter period such as 4 or 5 years) then the combination of these two vehicles could provide a very nice way for someone to fund college costs. If the annuities are deferred there is considerable time to build up a nice fund that will pay a very substantial amount at the time the funds are needed for college. The residual of the annuity will go to charity, there will also be a tax deduction when the annuity is funded. The downside, a 10 percent excise tax will be levied on payments if the recipient of annuity payments is less than 59 1/2 (probably a given).

Mon
30
Jun
2008
111
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#1 by Kathleen Bryan    

I Concur to Consider a 529 Plan

This does not sound like a charitable contribution, and I concur with John Atkins that a 529 Savings Plan would meet this person's needs. However, the website he gave was for the Nebraska State plan, and there are plans in most states. I recommend checking out http://www.savingforcollege.com/ where you can compare state plans side-by-side. Since fees can have a major impact, I recommend checking out their fee study at: http://www.savingforcollege.com/529_fee_study/. Morningstar also publishes a "Best and Worst" list each year, and if you want the 2008 version, just email me at kathleen.bryan@boh.com. Kathleen Bryan