The Family Educational Foundation Trust

The Family Educational Foundation Trust

The Family Educational Foundation Trust, an irrevocable, inter vivos trust.

Specific Purpose(s): To develop funds for the health, welfare and happiness of certain children and other beneficiaries as defined in the "governing instrument;" to provide for their education; to purchase items not generally easily affordable by low and middle income families such as expensive musical instruments, sports equipment required for certain sports activities. Child care when said child care is not provided by a working parent's company may be paid for by the trust; however, the IRS may consider this taxable income. The family trust may provide for the creation of "sprinkling" trusts for the benefit of several children within a family. There is no tax liability if the "governing instrument" so stipulates; however when funds are paid directly to natural persons as pensions rather than grants or scholarships, they create a tax liability for that natural person.

Special Provisions: The creator of this trust drafts a "contract" according to the instructions of the grantor which becomes the "governing instrument" of the trust. This "governing instrument" is otherwise known as the indenture or the contract agreement. If the specific provisions are written in the "governing instrument" then those provisions apply. If there is no provision covering a certain circumstance then the statutes apply. Refer to §§ 170 et. seq. of Title 26, the Internal Revenue Code.

Trustee: The board of trustees may consist of one person or as many as the creators may desire. Lord & Carter recommends from 3 - 5 members on the board of trustees. The signing power for purposes of banking transactions may be operable with one signature or may require two signatures as required by the "governing instrument." The trustee may appoint a manager to fulfill certain accounting duties. In order to maintain the trust as irrevocable there must be an unrelated trustee; an adverse trustee, one who has a small financial interest in the trust estate, and a third trustee who may be one of several beneficiaries. The sole beneficiary may not be the sole trustee.

Beneficiaries: In FDIC insured banks accounts are insured up to $100,000; however, trust accounts are insured up to $100,000 per beneficiary as long as the beneficiaries are registered with the trustee.

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