What is an educational trust?
Many parents dream of being able to afford to have their children privately educated, but few are financially sound enough to be able to free up the expensive funds required.
With university education now costing more than ever, there is a tax-efficient way of providing this opportunity for your child.
An educational trust can be applied for any child under 25 who is in full time education. By setting up this trust, parents can then remove these funds from the total value of their estate, thus reducing inheritance tax liability.
Funds within an educational trust can total up to £105,000 at any given time, before becoming liable to Pre Owned Asset Tax (POAT) which is charged at 4.75%.
In this way, parents can take on the role of trustee of this particular trust, as well as taking full advantage of the tax planning advantages that if offers.
Professional estate planners will be able to advise you of both the advantages and the pitfalls associated with setting up an educational trust.