College costs have a way of sneaking up fast—especially if you’re planning for more than one child or grandchild. That’s why it’s important to understand how to plan for college costs with estate planning and trusts. According to the College Board, average tuition and fees for the 2025–2026 academic year are $11,950 for a four-year in-state public institution. The average cost is $31,880 for a four-year out-of-state public institution. In addition, it’s $45,000 for a four-year nonprofit private institution. It is $4,150 for a two-year public institution.1
If education is part of your family’s future, the good news is that there are several ways to build education support into your estate planning—with different levels of flexibility, control, and tax advantages. Below are some of the most common tools families use.
Gifting Trust
A gifting trust allows you to set money aside for a beneficiary and keep it protected until it’s actually needed. It’s often used for education, but it can be drafted broadly enough to cover other goals too.
One reason families like this option is control. You can decide when distributions can occur and for what purposes. In many plans, the trust includes specific withdrawal rights (often called Crummey powers). So you can use annual gift tax exclusions while still preventing a beneficiary from having immediate, unrestricted access to the full amount.
Health and Education Exclusion Trust
A health and education exclusion trust (HEET) is a specialized tool that can support multiple generations—often grandchildren and great-grandchildren—while taking advantage of specific transfer-tax benefits.
A key feature is that it generally requires including a charity as a beneficiary (often around 10% or more) to qualify for its tax advantages. For families who want to combine education planning with charitable legacy planning, this can be a powerful strategy—but it requires careful drafting.
Education Provisions Inside a Revocable Living Trust
If you already have a revocable living trust, you can add (or tighten up) language that specifically funds education for a child or grandchild. This is a flexible option because you can:
- define what “education” means (narrow or broad),
- decide how much should be available and when,
- and redirect remaining funds to other goals if education costs are less than expected.
This approach also fits naturally within a broader plan that covers incapacity and smooth distribution after death.
529 Plans
A 529 plan is one of the most popular tools for education savings because it’s tax-advantaged and relatively straightforward. There are two main types:
Prepaid tuition plans
These plans allow you to lock in tuition at today’s prices at participating public, in-state schools. They are usually limited in what they cover and may not apply to room and board.
Education savings plans
These plans allow you to invest funds that can be used for a wider range of qualified expenses such as tuition, fees, books, computers, and room and board.
As of 2026, up to $20,000 per beneficiary per year can be used for elementary or secondary school tuition.2
Coverdell Education Savings Account
A Coverdell ESA is another tax-advantaged education account that can be used for both K–12 and college expenses. However, it comes with contribution limits and income restrictions.
In general, families with income around $95,000 or less (or $190,000 for joint filers) may contribute up to $2,000 per beneficiary per year.
UTMA and UGMA Accounts
Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA) accounts allow an adult custodian to manage funds for a minor without creating a formal trust. They can be a simple option for education-related gifts.
The tradeoff is timing and control: once the child reaches the age of majority (often 18 or 21 depending on state law), the account becomes theirs outright—and they decide what happens next.
A Note About Financial Aid
Education planning can affect need-based financial aid. The way an account is owned determines how it is reported on FAFSA and how it may impact eligibility. For example, some trusts and investment accounts may be treated as assets of the beneficiary, which can reduce aid.
This is a good reason to coordinate your education plan with both your legal and financial professionals.
We Are Here to Help
There isn’t one “best” tool for every family. The right approach depends on your goals, your timeline, how many beneficiaries you want to support, and how much control you want to keep. Working alongside your financial team, we can help you choose an education planning strategy that supports your family. It will also fit into your overall estate planning and legacy planning goals. Contact us to get started.
