Setting up a trust fund to help pay the school fees. The average annual cost for a senior aged pupil was recently estimated at over £30(not including extras). Just the thought of having to meet school fees for the next few years can fill you with dread and saving for them so they don’t break the bank can be a real challenge. Do grandparents pay school fees? Are trusts tax deductible?
Any gains above the allowance will. Discretionary trusts. It means income and capital can be awarded to the grandchild as the trustees see fit and there is no automatic right to receive the assets.
As pawncob states , it is very unlikely to ever be an issue so I would not worry. The fees amount to over £10p. By Rachel Rickard Straus. A grandparent can open an investment account designated for their grandchild with a gift and the account will act as a default bare trust.
This account can then pay school or university fees directly. The big advantage of a bare trust is their tax treatment. For example, you could take advantage of your grandson’s tax allowances by putting just enough in a bare trust to pay the school fees with a little left for the child at 18. If control is the key, or income is needed now – to pay for school fees, for example, then a trust could be the best option. However, the more control you gain, the more complex – and costly – the trust can become.
This is of course fine, but my query is a tax one. The trust deed will also name the group of people who you want to eventually benefit from those assets (the beneficiaries). All parents can take a quarter of their pension pot as a lump sum when they reach 55. Using this can be a tax efficient way of paying for school fees. If the parents set up the trust with the intention to fund school fees , then a discretionary trust may not be a tax efficient option.
This means it could receive income from the trust. Many people think this is a way to save tax – have the trustee pay the school fees with pre-tax income. The Trustees (the grandparents) agree to make a distribution of income of £2to the grandchild to help pay school fees.
The Trust is treated as paying out £2net of tax: Gross distribution = £1364. Refundable tax credit at = £114. For example, a parent may wish to create a discretionary trust to provide for the children’s school fees, or start building up a fund towards their university education. A trust may also be part of an inheritance tax (IHT) lifetime planning exercise by the parent.
There are many different types of trust funds and therefore different types of fees and cost amounts associated with setting up and managing a trust fund. Trust funds can significantly reduce a student’s eligibility for need-based financial aid. The discretionary power to make distributions for education isn’t limited to postsecondary schools. You may also use trust monies to pay for private primary and secondary education, supplemental educational programs, educational summer camps, tutoring, or even to buy a computer. This can offer a return of around 3-3.
Here is an example for St George’s Weybridge. Tap up granny and grandad to help with the fees. Investment adviser Towry reports that of grandparents contribute directly to their grandchild’s school fees. The investment income earned in the trust can be used to pay for expenses that directly benefit the child or grandchild (e.g. private school tuition, post-secondary education costs, lessons, camps, etc). Paying for school fees can be expensive though and joint incomes can sometimes be reduced after having children, as one parent reduces hours or stops working.
This shouldn’t stop you from privately educating your children though, providing you have taken the necessary steps to plan ahead. We know that our country is full of brilliant public schools , many of you probably attended one! But, of British children now attend a fee – paying school and education costs is a hot topic with our clients. Any family with a child at a GDST fee-paying school can apply.
But our funds are limited and we need to make sure we help as many families as we can. The application process will be asking for details of your income and assets (in the same way we do for bursary applications) so that we can fully assess each family’s situation to ensure funds are shared as fairly as possible.