Trusts - Using a trust as a preferred payment source for expenses

Whether a trust can be used as a preferred payment source depends on the type of trust. For example, funds cannot be withdrawn from a child trust fund until the child is age 18. 

When modeling a trust, be sure that the child (or children) are ticked as at least co-owners of the expense.

If you intend to use the trust as the preferred payment source for the expense (e.g. to pay school fees) be aware that the software intentionally disallows ad hoc draws from certain types of assets that have special tax treatment - e.g. child trusts, other trusts, VCT's and EIS's. Ad hoc withdrawals are allowed from charitable trusts.

If you model the trust using the Child Trust or Other Trust investment Type, you will need to set a draw down strategy from the trust. Go to the Investments or Savings screen and select the trust in the ledger. Expand Advanced Settings > Withdrawal Limit / Draw Down Strategy.

Select the event at which withdrawals will begin and specify the amount of these annual withdrawals.

Funds will be drawn annually from the account and captured by expense (e.g. school fees) with its preferred payment source set to the trust.

To end, increase, or decrease these withdrawals, you may add an event (or multiple events) to the timeline and use the Investments or Savings screen's Step Up / Step Down panel to increase, decrease or end these withdrawals.

To explore how to model school expenses in general, view our video: "Plan for School Fees and Other Educational Costs."