Can funds from a trust account that was set up for college tuition be used for housing rent?Can a check be written on a trust account, that has been set up for education, for the rent on a house that the student is living in, vice living in the dorm, while enrolled in college without it being counted as income? Attorney answers (3)
Thanks for your question. Since I am an attorney, I cannot ethically give you specific legal advice on your situation, since you are not my client, but I can only provide you with general information that you may find helpful.
Generally, a trust document is written with broad discretion for the trustee to make decisions as to what is and is not permissible. The terms of the trust should provide a “framework” of terms that gives the trustee guidance. Any payment by the trustee should be made directly to the housing or education provider, not the beneficiary of the trust. The best advice that I can recommend to you is to contact a local Wills and Trust attorney that can assist you review the exact language of the trust. Best of luck, Shawn C. Newman, Esq. Attorney At Law 1881 NE 26th Street, Suite 212E Wilton Manors, FL 33305 (877) 552-9385 Shawn@ShawnNewman.com 7 people marked this answer as good
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Thanks for question. Distributions from trusts are not considered income to beneficiary. Distributions for education should be made directly to college.
An attorney should review trust document to determine if trust allows payments for education and housing. Once a trust is funded-income can accumulate inside trust. It is important to make sound decisions on who that income is distributed to and it can make difference on how that income is treated concerning income tax. So-the best advice is to have attorney review complete trust and advise how and when to make distributions and have CPA do tax returns.
The trust itself would have to be consulted to determine the propriety of an expenditure, but generally room and board would be considered as part of the permitted expenditures absent some restriction in the trust. Any distributions from the trust to or for the benefit of the student would carry out income of the trust. Thus, if the trust earned $1000 of income, and $2000 is paid for education, the student would be taxed on the $1000 earned, but not everything distributed.
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