Some friends are getting married, and I know they have a family planned for the future (though no specific timeline yet). I would like to either set up a college trust fund or refer them to a resource that will set one up for them, even though their child doesn’t actually exist yet. I have a certain amount that I was going to give to them for this purpose, and while I suppose just giving them cash that they scurry away on their own would be fine, I would like to be able to have it sheltered and earning $ and be earmarked specifically for a future education for their kid.
Any suggestions? Everything I’ve looked into usually requires the name of the kid. Or is there some other fund or other investment model that would suit equally well for the purpose of this particular gift? Thanks!
You may want to look into savings bonds. Maybe get some with a 20 year term, so they’d come due around the time the kid is going to college.
Setting up a trust or something is a little difficult because of the maintenance issues. Who is going to manage it over time? Who will watch over the investments? You could look into some 529 plans. These plans are offered by each state and have a variety of investment options. Some of them you can specify a timeframe and they will manage the money (more risky at first, less risky later). You do need a name, but that name can be changed later. So the parents can set it up in their own name initially and change it to the child’s name later.
You don’t need a lawyer to set up a 529 plan, which has some great tax advantages. However, I don’t know if you’re allowed to set up a 529 for a child who isn’t yours.
I wouldn’t give people money in any form for an unborn child. What if they never have kids? Would you expect the money back? There are too many ways for that type of arrangement to go badly, no matter how well intentioned everyone is.
If you want to set up a 529 plan now, go ahead and open one with yourself as both owner and beneficiary. You will remain in control of the money. You will be able to change the beneficiary to their child when it is born. You can also change the owner to the parents at that point. If your friends never have children you can give the account to anyone else of your choosing.
