High-net-worth and ultra-high-net-worth individuals have to get creative when planning for college expenses because traditional financial aid and scholarship options may not be available to their students. Saving for college can mean more than setting up a 529 plan or an inheritance trust fund. It’s important to consider where your kid’s college fund fits into your overall wealth management plan.

What to consider when choosing a trust fund vs 529 plan

Investment choice flexibility

When it comes to your investment, you want to consider the flexibility of its future use. With a 529 savings plan, your investment is limited to educational expenses and even further limited to just tuition and fees if you use a prepaid 529 plan.

A trust fund is not limited to only educational uses, which means you can use it to support other important milestones such as buying a home or starting a business.

Contribution limits

529 plans offer more generous contribution limits upfront when compared to setting up a trust fund. It’s possible to front load up to 5 times the amount of your state’s annual gift limit into a 529 plan without incurring the gift tax. 

Distribution flexibility

A 529 plan can only fund educational experiences and can only have one beneficiary on the account at a time. A trust fund allows you to have more control over distributions, and use them for more types of expenses, and for more than one beneficiary.

Tax Planning

Using a trust fund or a 529 plan can provide tax benefits. Wealth invested in a 529 savings plan is able to grow tax-free and then the distributions are tax-free when used on qualified expenses. Funds placed in a 529 or a trust account can also reduce your estate and overall tax burden.

A financial advisor can help you choose the right college savings plan

Understanding how college funding strategies impact your overall investment plan takes an experienced eye. At the FCS Family Office, our team has decades of experience helping wealth families navigate all the complexities of wealth management across generations.

A financial advisor can assist you in making the most of your wealth for your beneficiaries and for you.

Reach out, let’s talk.