A child trust fund can be established to set aside funds for college tuition, living expenses, healthcare costs, and to pass along family inheritance. Since there are various types of trusts it is recommended to consult with a lawyer to discuss overall goals and tax advantages.
Prior to arranging a child trust fund to fund college expenses it's important to become familiar with the gift tax exclusion for educational tuition. To qualify for the exclusion tuition has to be paid directly to the school.
Furthermore, the school must be recognized as a qualified education organization. This encompasses both private and public institutions that offer formal education. Most often trust funds are arranged to cover college tuition, but can also include private schools, preparatory schools, and trade schools.