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 education 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 about 10 percent or more). 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 as well as 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.
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. How an account is owned 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 assets of the beneficiary, which can influence the amount of aid they receive.
We Are Here to Help
Working together with 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. Let us help you choose the right approach for your loved ones; contact us today.
Call Santaella Legal Group, serving all of California, at (925) 831-4840, or reach out to us here.