4 Ways to Fund Your Child's Education as a U.S. Expat
- Michael Jones
- Jul 13
- 3 min read
Updated: Jul 14
For U.S. expat parents, funding a child’s education isn’t just about tuition bills—it’s about navigating multiple tax codes, ensuring liquidity across borders, and maintaining flexibility as your family’s residency evolves. Whether your child lives with you abroad or remains in the U.S., how you save and structure those funds can have long-term tax and financial planning consequences, both at home and overseas.
Below, we'll explore four of the most powerful—and nuanced—ways to fund your child’s education as a U.S. expat: the Crummey Trust, 529 Plan, 2503(c) Trust, an UTMA/Custodial Account, and Direct Payments. Each vehicle offers a unique blend of tax advantages, legal structure, and planning flexibility. But when layered against a global backdrop, what looks great in a U.S.-based vacuum can easily become a compliance headache abroad if you’re not careful.
Let’s explore how each of these options measures up when your life—and your child’s future—straddles borders.
Crummey Trust
For expat parents (or grandparents) funding a child’s education across borders, a Crummey Trust isn’t just a clever tax strategy—it’s a powerful tool for long-term control, flexibility, and cross-border stability.
At its core, a Crummey Trust is an irrevocable trust designed to let donors make gifts (i.e., contributions) that still qualify for the annual gift tax exclusion ($19,000 in 2025). It does this by giving the beneficiary a short-lived right to withdraw each contribution—called a “Crummey power.” After this temporary right expires (usually after 30 days), the funds stay in the trust, managed by a trustee and protected from premature use.
But what makes this trust truly exceptional for international education planning is its ability to solve problems that no brokerage account or out-of-pocket payment can touch:
Cross-border control: Whether your child is in London, Toronto, Chicago—or right beside you abroad—a Crummey Trust keeps you in control of the timing and purpose of every distribution. There’s no automatic handover at age 18 or 21 like with custodial accounts. Instead, you set the rules: funds can be released based on academic progress, enrollment, relocation needs, supplies or specific goals you define. The trust moves at your pace, not the court’s, the calendar’s, or your child's.
Flexibility: A Crummey Trust isn’t bound by narrow definitions of “qualified education expenses.” Unlike a 529 Plan, it can cover not just tuition and books, but also international school fees, housing, travel, tutoring, internships, language immersion programs, or relocation costs. This matters for globally mobile families where education doesn’t always follow a traditional path—or a single jurisdiction’s rules.
Legacy preservation: A Crummey Trust isn’t limited to just covering school costs. Once education goals are met, the trust can continue supporting your child through life’s next chapters—graduate school, housing, a first business, or wealth-building opportunities. Because the assets remain in trust, they stay protected from premature access, creditors, or future spouses. This allows you to extend your support well into adulthood, while still preserving the integrity and long-term vision of your family’s legacy—on your terms.
Tax positioning: When structured as a grantor trust, a Crummey Trust keeps income tax responsibility with the donor—not the child—avoiding kiddie tax and streamlining U.S. filings. Contributions that fall within the annual exclusion generally sidestep U.S. gift tax altogether, thanks to the built-in withdrawal rights.
But internationally, it’s not one-size-fits-all. Some countries treat foreign trusts more harshly than others—taxing not just the growth, but sometimes even the initial contribution. Others may require registration, impose annual reporting, or treat distributions as income to the child. Without cross-border review, what’s efficient in the U.S. could quietly trigger penalties, double taxation, or compliance headaches abroad.
For example:
France taxes the beneficiary for gifts/contributions made to the trust by the grantor after (rather modest) thresholds are exceeded, and taxes foreign trust assets annually based on it's market value.
Mexico may scrutinize contributions for potential gifts and penalizes distributions lacking documentation. If the beneficiary is tax resident, payouts may be fully taxed as ordinary income, and prior contributions can trigger attribution if the trust defers income or lacks transparency.
Thailand taxes trust distributions to Thai tax residents when the distribution is brought into the country—even if earned years prior, and even if you have already paid taxes on the income. Tax credits for U.S. taxes paid exist in theory under the treaty, but are rarely granted in practice.
Portugal may tax all income distributed from the trust, regardless of whether it's trust income or a return of trust principal.
While U.S.-domiciled Crummey Trusts may provide phenomenal customization and flexibility, they should generally be reserved for those who are tax residents of countries with favorable and straightforward trust tax-laws.