You Win, We Win—With An Education Unitrust

You may ask, is it possible to be philanthropic and still fulfill a personal goal such as saving for a college fund at the same time? Happily, the answer is a resounding yes! While your children are still in the Lake Oswego School District schools, set up a Charitable Remainder Unitrust account with the Lake Oswego School District Foundation. This trust will expire four years after the student's projected start date for college.

Avoid Capital Gains Tax & Estate Tax
Fund the Unitrust the same way you would have funded a "college fund" elsewhere. You will enjoy a significant charitable income tax deduction for doing so. Even better, if you put in appreciated securities, then the subsequent sale of the securities will not be subject to capital gains tax! The entire principal amount would remain intact, available for reinvestment into various asset allocation means. Moreover, the market value of the asset in the Unitrust is removed from your estate, thus saving estate taxes too!

Strategy for Investment of Education Unitrust
Initially, the trust assets would be invested to generate growth, but no income while your children are in public schools because there is no tuition to pay. What does not get paid out during this time period will be tracked and marked into an "IOU" account. Following the senior year of high school, the asset portfolio would be reinvested to generate high income. This income would be paid out to your child (subject to his/her tax rate-not yours!) to be used to pay for college tuition. Money can be drawn from the "IOU" account to supplement the annual income stream to pay for books, board and other expenses associated with higher education.

Fulfill Philanthropic Objective
After four years of college, the Unitrust term expires and whatever remaining capital within would go to the Lake Oswego School District Foundation to be used to sustain the ideal teacher student ratios in the District at all grade levels! This would help to benefit the next generation of school kids (including your future grandchildren) in receiving a quality public education!

Flexible Plan
What if your child chose not to go to college for a year or two in order to join the Peace Corps, participate in an experiential program abroad (such as American Heritage Program)? No problem - you can still pay out the annual income stream to the young adult (at his/her tax rate) to supplement any stipends that he/she might receive from a program. In other words, there is no such thing as a qualified expense. If your high school graduate decided that he/she was a rebel without a cause, you as co-trustee can decide not to make any pay-out from the Unitrust for that year.