Setting up a trust to fund a child's education

  • Identify different trusts appropriate to fund a child's education
  • Explain benefits of bare and discretionary trusts
  • Explain how trusts are taxed
Setting up a trust to fund a child's education

With birth rates expected to rise as a result of Covid-19, setting up a trust for the benefit of the children or grandchildren could not only help save tax but can also assist with education costs.

Education fees can be costly.

The creation of a trust can assist with these costs and if structured correctly can also help save tax.

Article continues after advert

It is expected that directly after and over the then next few years we will see a boom in birth rates. 

Other than families being at home and making more time for each other, history suggests that birth rates have sharply increased following periods of national crisis, such as after World War 2. 

A brief published by the Institute for Family Studies (IFS) suggests that Covid-19 could boost the number of births by up to 40 per cent over the next four years and, even after the epidemic has run its course.  

Other academic research posted in the IFS brief suggests that death rates also have an important role to play in the recovery; the loss of friends and family members can provoke ‘mortality replacement’.

Another factor that could lead to the rise is that fertility clinics are closed as a result of lockdown as they were not classified as essential services and patients who were already under treatment were advised to defer their treatment.

Once the lockdown eases, there is likely to be a backlog of patients who will want to restart or start their fertility treatment.

So now might be the right time to plan ahead for those who wish to make provisions for their children and grandchildren by setting up a trust for their education.


Despite the rise in unemployment and job uncertainty, the indications are that some of the population will come out of the other side of the pandemic with cash to spare. 

A report published by L&G and the Centre for Economics and Business Research (CEBR) has revealed that the 'isolation economy' has shifted consumer spending habits amounting to £12.9bn with expenditure being on more ‘at home’ categories.

Despite this shift, UK households are spending on average 31 per cent less when compared to pre-lockdown. 

When we advise on setting up trusts the key client questions are:

  • What type of trust should I set up?
  • What are the tax consequences of setting up a trust? and
  • How are the fee payments made?

Paying for education

On average, private school fees can range from £15,000 - £30,000 per child per year. This is a significant sum of money and this is before they consider university and other further education costs. 

Setting up a trust may be ideal for those parents or grandparents who may wish to save money over a period of time to fund these expenses or if they wish to transfer a lump sum as part of their estate planning.

The Office of National Statistics reported that in England in April 2020, 89 per cent of deaths due to Covid-19 was in the 65+ age group.