According to the College Board, the average tuition and fees for the 2025–2026 academic year are $11,950 for a four-year in-state public institution; $31,880 for a four-year out-of-state public institution; $45,000 for a four-year nonprofit private institution; and $4,150 for a two-year public institution. If postsecondary education is in your family's future, the following tools can be excellent additions to your estate plan to help provide for educational needs.

Gifting Trust

A gifting trust lets you hold and invest money or property for your chosen beneficiaries. While frequently used for education, this type of trust is flexible and can fund a variety of needs while providing significant tax advantages. You have the flexibility to contribute annually or pause your contributions at any time. A gifting trust is typically set up such that the funds remain protected until they are needed for school. By including specific withdrawal rights (often called Crummey powers), you can take advantage of annual gift tax exclusions to systematically reduce your taxable estate without granting the beneficiary immediate, unrestricted access to the full principal. This approach allows you to use annual tax exclusions and plan ahead for future expenses without giving away complete control of the funds.

Health and Education Exclusion Trust

A Health and Education Exclusion Trust (HEET) can be a smart way to help multiple generations with education or healthcare costs while taking advantage of certain tax benefits. This specialized type of trust allows you to cover tuition or medical expenses for your grandchildren and great-grandchildren without those payments counting as taxable gifts. 

Because of its unique structure, a HEET also helps you avoid the heavy taxes that normally apply when passing wealth down multiple generations. To gain these tax benefits, the trust must include a charity that receives a steady portion of the funds (usually at least 10 percent). Ultimately, it is a highly effective way to blend your family's educational and health needs with your charitable legacy.

Provision in a Revocable Living Trust

If you have a revocable living trust, you can include a specific provision to fund a child's or grandchild's education, ensuring that they are supported even if you pass away before they finish school. A primary benefit of this approach is its flexibility. During your lifetime, you retain complete control to update the trust, dictate exactly how the funds are used, and define education expenses as broadly or narrowly as you see fit. You also are not required to dedicate all trust assets to education; any remaining funds can be allocated to other purposes of your choosing.

529 Plans

A 529 plan is a tax-advantaged savings plan designed to help families save for a child's or grandchild's future education. There are two main types: prepaid tuition plans and education savings plans. 

Prepaid tuition plan. In participating states, a prepaid tuition plan lets you prepay future college tuition and required fees at today's prices, helping protect against rising costs. Most plans focus on tuition at public, in-state colleges and cannot be used for room and board or for elementary or secondary school tuition. If your student later chooses a private or out-of-state school, the prepaid funds can usually be applied toward tuition, though you may need to cover any difference in cost.

Education savings plan. An education savings plan allows you to invest money tax-free for qualified education expenses. Funds can be used not only for tuition and fees but also for room and board, computers, books, and other supplies. Some plans can even cover certain expenses at some international institutions. In addition, as of 2026, up to $20,000 per beneficiary per year can be used for elementary or secondary school tuition. 

Coverdell Education Savings Account

A Coverdell education savings account (ESA) is a tax-advantaged savings account designed to pay for eligible education expenses. Contributions grow tax-free, and withdrawals are also tax-free when used for qualified education costs. Unlike some other options, Coverdell ESAs can cover both elementary and secondary education expenses and college costs. 

Coverdell ESAs have income limits and an annual contribution cap. Families that earn about $95,000 or less ($190,000 for joint filers) can contribute up to $2,000 per beneficiary per year.  

Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA) Accounts

Uniform Transfers to Minors Act (UTMA) accounts and Uniform Gifts to Minors Act (UGMA) accounts allow an adult custodian to manage money or property for a minor child. The custodian handles the funds for the child's benefit, including education expenses, until the minor reaches the age of majority (generally 18 or 21, depending on the state). Once the child reaches that age, the account is turned over to them, and they can decide how to use or invest the money. These accounts do not require specialized legal documents or a court-appointed trustee, making them a simpler alternative to a formal trust.

Achieving a Better Life Experience (ABLE) Accounts

For families of individuals with disabilities, Achieving a Better Life Experience (ABLE) accounts may also play a role in education planning. Designed for individuals with disabilities, ABLE accounts are tax-advantaged savings accounts that can be used for education and other qualified disability-related expenses. They allow a beneficiary with a qualifying disability to save money while preserving their eligibility for certain means-tested public benefits and supporting their overall quality of life. Because the funds can be used for a broad range of qualified expenses, including education, unused education savings can typically be redirected to other disability-related needs.

Impact on Financial Aid

Keep in mind that setting aside money for a child's or grandchild's education may affect their ability to qualify for need-based financial aid. Who owns an account determines how it is reported on the Free Application for Federal Student Aid (FAFSA) and how it counts toward aid. For example, most trusts and investment accounts are reported as the beneficiary's assets, which can influence the amount of aid they receive.

What If There Is Money Left Over?

Setting money aside for your children's or grandchildren's education can be a meaningful way to support their future. In some cases, however, not all the funds are needed for college expenses. For example, your child or grandchild may receive a sizable scholarship, choose a trade school that is less costly, or decide to join the workforce after high school graduation. You may wonder what you can do with the excess money. The answer often depends on how the money is managed, how the savings are structured, and what kind of strategies are involved. 

Gifting trust. With a gifting trust, you can include instructions about what should happen if education funds are not fully used. For example, you may allow the beneficiary to use the remaining funds for other goals such as purchasing a house, starting a business, or saving for retirement. You can also name a different beneficiary (e.g., a family member, a friend, or a charity) to receive the remaining amount. 

Health Education Exclusion Trust. Provides for the educational and medical needs of multiple beneficiaries across multiple generations (typically grandchildren and great-grandchildren). If one beneficiary does not use all the funds, the money remains in the trust and can be used to cover qualified education or medical expenses for younger family members as they come along. 

Revocable living trust. If your estate plan uses a revocable living trust, you can include trust provisions directing the trustee to pay for a child's or grandchild's education after your death. The trust document can also specify what should happen if the full amount set aside for education is not needed (for example, allowing the remaining funds to pass to the beneficiary outright or be redistributed among other heirs). Because the trust is revocable, you can revise the instructions or add new contingencies at any time until you pass away or become incapacitated (unable to manage your own affairs).

Education savings plans such as 529 plans and Coverdell education savings accounts (ESAs) offer several options if the original beneficiary does not need the funds. In many cases, you can change the beneficiary to another qualifying family member or roll over the money into another account of the same type. Unlike 529 plans, Coverdell ESAs have a built-in distribution deadline. If funds remain in the account when the beneficiary turns 30, the balance must generally be distributed within 30 days unless the beneficiary has special needs.

Recent tax law changes also provide an additional safety valve for unused 529 funds. If the account has been open for at least 15 years, up to $35,000 (lifetime limit) may be rolled into a Roth individual retirement account (IRA) for the beneficiary, subject to annual contribution limits. In addition, up to $10,000 from a 529 plan can be used to repay qualified student loans for the beneficiary or their siblings.

Rolling over or changing beneficiaries typically does not trigger federal taxes, but state tax rules may vary, especially if you claimed a state tax deduction or credit when you made the original contribution. If the funds are ultimately withdrawn for non-education expenses, the investment earnings will generally be subject to income tax and a 10 percent federal penalty.

Uniform Transfers to Minors Act (UTMA) accounts and Uniform Gifts to Minors Act (UGMA) accounts hold money and property for a minor, and an adult custodian manages the account until the child reaches adulthood. The funds do not have to be used for education and can generally be spent for the child's benefit, though they should not be used to pay for everyday parental responsibilities such as food, clothing, or housing. The assets legally belong to the child. Once the child reaches the age of majority (usually 18 or 21, depending on the state), the account is transferred to them outright, and they can use the money for any purpose, even if they choose not to pursue higher education. In other words, there is no way for the original contributor to reclaim unused funds. If the minor passes away before the account is turned over, any remaining funds are distributed according to state intestacy law.

We Are Here to Help

There are many different options for funding your family's educational future. We are here to assist you and your financial team. We can craft a plan that accomplishes your family's education goals and sets your children or grandchildren up for the best possible future, and in choosing the best strategy for your unique situation, to ensure that your wishes for any unused funds are carried out.

Contact us today to get started.

This article is a service of Jacklyn A. Truppa of Dynasty Law, LLC. We don't just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Family Wealth Planning Session, during which you will get more financially organized than you've ever been before and make all the best choices for the people you love.

The content is sourced from Dynasty Law, LLC, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own, separate from this educational material.