With all of the financial strains weighing on a family these days, saving for our children’s education can seem almost too much to bear. Tuition rates are increasing and show little signs of slowing; so while current post-secondary graduates leave school saddled with tens of thousands in debt, children born today could face debt totals in the hundreds of thousands after graduation. Faced with this future, many families make the most of government-supported RESPs and maximize their contributions. Many also engage their children in saving early on to prepare them for the realities of pursuing their dreams. There are still some other ways to put away money for your child and ensure that is used for its intended purpose, one of these ways is a legal trust.
IN SAVINGS WE TRUST
Once a RESP contribution is maxed out, one of the best strategies for education savings is to create a trust in the name of your child or children. Rather than take taxable earnings out of your business or investments, contribute to a trust over time and have that transition to your child when they are ready to begin their post-secondary education. Interest earned in a trust can be taxable, but your child’s income when they use the trust is likely to be minimal if any, so the money will be taxed in the lowest bracket. Trusts can also be established with written agreements and conditions to ensure the money is put to its intended purpose. All of these factors make trusts a secure investment in your child’s future.
WE CAN HELP
Planning for a child’s higher education can be intimidating, but the most effective way to handle those fears is to be prepared. While RESPs offer great incentives like government grants and tax-free savings, contributions are capped annually. Trusts can be used as an excellent supplement for education savings; they could mean the difference between a Bachelor’s degree and a Doctorate. Here at Liu & Associates we can help make the most of your current contributions and we can offer advice on what step to take next. Trusts are just one of the many strategies we have to help you shoulder the burden of your children’s education.