Bay Area Estate And Tax Planning Law Firm

Yet another example of the power and utility of trusts

On Behalf of | Sep 9, 2016 | Trusts |

Imagine that you’re a California grandparent who dotes mightily on the grandkids. As clear evidence of your love, you have been steadily funding college saving plans for them, which have reaped gains over the years owing to their qualified status that protects them from taxation.

And then, out of the blue, a California creditor files a judgment claim against you, demanding repayment from all available sources.

Under California law, that throws those savings vehicles into the mix. As a commentator on college plans and debtor judgments noted in a recent media article, a creditor “can proceed against [a] 529 College Savings Plan just like any other asset not exempt from judgment collections.”

That is because state law in California simply doesn’t shield qualified education plans from creditors with valid claims for repayment.

If you’re a California resident funding such a plan while facing some material financial challenges, knowing that information is more than just a bit alarming, isn’t it?

Fortunately, there are myriad ways to help out loved ones with schooling costs, and many of them provide a funder with ample protections against third-party claims.

A visit with a proven tax and estate planning attorney can enlighten a planner as to his or her options.

As noted in the above-cited article, a well-considered gifting strategy can be a sound idea for funding a loved one’s education, as can also be a trust.

In fact, an irrevocable trust can be an especially viable and powerful vehicle through which to fund an education, for a number of reasons that a proven planning attorney can point out.

When it is money intended for the vital needs of a family member, you want to know it’s protected. A suitable trust vehicle might be just the instrument to fully promote that aim.