Case #2 · Lester and Karin H.
Education Trust for Seven Grandchildren
Funding college for seven grandchildren with appreciated stock.
The situation
Lester and Karin of Ocean Ridge, Florida, have seven grandchildren, ages 4 to 11, and a substantial block of appreciated stock.
No payouts are needed for eight years; by years 12 or 13, three or more grandchildren may be in college at once.
The goals
- A very flexible plan
- Encourage the grandchildren to pursue college diligently
- Let the trustee pay students making satisfactory progress
The strategy: An advanced education unitrust
- Transfer appreciated stock over four years: $200,000, $180,000, $160,000 and $140,000 ($680,000 in all).
- Use the charitable deduction from the gift plan to reduce other income.
- Because the trust is funded with joint property, the couple has two annual exclusions per student each year.
- The trustee distributes funds to students making satisfactory progress in college.
- After a 20-year term, the remaining funds go to charity.
The results
| Tax savings | Over $400,000 (capital gain bypass, income tax and bracket benefits) |
|---|---|
| Available for the students | Over $1.1 million after tax |
| To charity after 20 years | Over $1 million |
Figures are illustrative and based on the tax rules in effect when the case was prepared. Results vary.
Could a strategy like this work for you?
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