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2503(c) Trusts for Education Savings

August 26, 2011

John Jastremski Presents:

 

2503(c) Trusts for Education Savings

 

Definition

A Section 2503(c) trust is a trust established for the benefit of a minor child and managed by a trustee. It is named after Section 2503(c) of the Internal Revenue Code, which grants an exception to the general rule that only gifts of present interests qualify for the annual federal gift tax exclusion.

Prerequisites

  • Your child must be under age 21 in order to be the beneficiary of a 2503(c) trust

Key Strengths

  • Child will not have control of trust assets until age 21

Key Tradeoffs 

  • Trust is irrevocable once established
  • Expensive to establish and maintain the trust
  • A significant lump sum is usually required to establish the trust
  • Trust income over a certain amount is taxed at a higher rate than individual income
  • The original beneficiary cannot be changed
  • Negative impact on your child’s eligibility for financial aid

Variations from State to State 

  • None

How Difficult Is It to Implement? 

  • Select legal professional to draft trust document
  • Transfer assets to the trust
  • File annual tax return on behalf of trust
  • Distribute assets to child when child turns 21 (or as specified in trust)

 

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

 

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John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

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