Planning for the Future: Setting Up a Trust for Graduating Seniors

Graduating from high school or college is a major milestone – one filled with excitement, new opportunities, and the start of a new chapter in life. For parents and families, it’s also a time to think seriously about the graduate’s financial future and how to protect and manage assets as they transition into adulthood. One smart way to do this is by setting up a trust specifically designed for graduating seniors.

What Is a Trust and Why Consider One for Graduates?

A trust is a legal arrangement where one person (the grantor) transfers assets to another person or institution (the trustee) to hold and manage for the benefit of a third party (the beneficiary). Trusts can be tailored to meet specific goals, like ensuring that funds are used responsibly or protecting assets from creditors or taxes.

For graduating seniors, a trust can provide financial security, protect inheritance or savings, and offer guidance on how and when funds are accessed. Rather than handing over a large sum of money outright – something that can sometimes lead to impulsive decisions or financial mistakes – a trust allows parents to control the timing and conditions under which the graduate receives money.

Benefits of Setting Up a Trust for Graduating Seniors

1. Financial Protection and Management
   A trust can safeguard assets from being mismanaged, lost, or spent too quickly. The trustee, who may be a trusted family member or professional, manages the assets according to the instructions laid out in the trust agreement.
2. Customized Distribution Plans
   Parents can decide when and how money is distributed. For example, funds can be released for educational expenses, first-time home purchases, or to support certain milestones like starting a career or launching a business. This flexibility ensures the graduate gets support while learning to manage money wisely.
3. Protection from Creditors and Lawsuits
   Trust assets can be shielded from creditors or legal claims, which is particularly important if the graduate is entering a high-risk profession or starting a business.
4. Tax Benefits
   Some trusts offer tax advantages by minimizing estate taxes or protecting assets from being counted as income by the beneficiary, which can preserve the overall wealth for the long term.

Types of Trusts Suitable for Graduates

• Revocable Living Trust: Allows the grantor to make changes during their lifetime. It provides flexibility but offers less asset protection.
• Irrevocable Trust: Once established, the terms cannot be changed easily. This type provides stronger protection from taxes and creditors.
• Education Trust: Specifically designed to cover educational expenses such as tuition, books, and room and board.
• Discretionary Trust: The trustee has the discretion to decide when and how to distribute funds based on the beneficiary’s needs.

Set Your Senior Up for Success