Can the trust fund tuition for adult education or career retraining?

Establishing a trust allows for a tremendous amount of flexibility in how assets are distributed, and one frequent question we receive at Moreno Valley Probate Law from clients like you is whether a trust can be used to fund ongoing education, even for adult children or for career retraining – and the answer is generally yes, with careful planning.

What Happens If I Don’t Have a Trust?

Many people mistakenly believe that if they pass away without a will or trust, their assets will automatically go where they intend. However, California law dictates a specific process called intestate succession. For example, if you’re married with children, your spouse may not receive *everything*. Separate property, assets acquired before the marriage or received as a gift during marriage, is distributed according to a set formula involving the spouse and other relatives. This can lead to unintended consequences and unnecessary legal battles. Furthermore, without a trust, all assets over $184,500 are subject to probate, which can be a lengthy and expensive process, with attorney and executor fees often reaching 4-5% of the estate’s value. This means a $500,000 estate could lose $20,000 – $25,000 to probate costs!

How Can a Trust Help Fund Education?

A properly drafted trust can specifically outline provisions for educational funding, even for adult children pursuing further education or career retraining. This isn’t just about college tuition; it can cover vocational schools, professional certifications, online courses, or any other approved educational expense. The trust document can specify the amount of funding available, the eligible expenses, and any conditions that must be met – such as maintaining a certain grade point average or completing a specific course of study. In California, as a community property state, assets acquired during marriage are owned 50/50, and upon death, the surviving spouse receives a “double step-up” in basis, which can significantly reduce capital gains taxes. This benefit is preserved within a well-structured trust.

What About Managing the Trust Investments?

When acting as a trustee, it’s crucial to understand your responsibilities, particularly when managing investments to fund ongoing expenses like education. The California Prudent Investor Act dictates that trustees must act with the same care, skill, and caution that a prudent person would use when managing their own finances. This doesn’t mean avoiding all risk, but it does require careful consideration of the beneficiary’s needs, the time horizon for the funds, and the overall investment strategy. I recently worked with a client, Sarah, whose father had established a trust to fund her graduate studies. However, the initial investment strategy was overly conservative, generating insufficient returns to cover the rising tuition costs. By carefully rebalancing the portfolio and incorporating more growth-oriented investments, we were able to ensure that Sarah had the funds she needed to complete her degree without jeopardizing the long-term sustainability of the trust.

What If a Beneficiary Disagrees With the Trust Terms?

It’s important to remember that trusts and wills can be contested, but California law narrowly enforces no-contest clauses. These clauses, which attempt to prevent beneficiaries from challenging the document, only apply if the beneficiary files a direct contest *without* probable cause. This means a simple disagreement isn’t enough to invalidate the clause; there must be a legitimate legal basis for the challenge. I once had a client, Michael, whose sister attempted to contest their mother’s trust because she believed she was unfairly excluded. However, the trust was meticulously drafted, and the sister lacked any credible evidence to support her claim. The court ultimately dismissed the challenge, and the trust remained intact. The key to avoiding disputes is clear communication and a well-drafted document that reflects the testator’s wishes.

At Moreno Valley Probate Law, Steven F. Bliss ESQ. can help you create a comprehensive estate plan that addresses your unique needs and ensures your assets are distributed according to your wishes. We can guide you through the process of establishing a trust, drafting the necessary provisions for educational funding, and navigating the complexities of California probate law.

Call us today at (951) 363-4949 to schedule a consultation.

Don’t leave your future to chance; protect your loved ones and ensure your legacy is preserved with a comprehensive estate plan from Moreno Valley Probate Law!