The Education Trust

Ask a Nigerian family with money what it spends the money on, and the first answer is always the same. School fees.

It is not a small answer. Across a working life, a middle-class Nigerian family will spend more on education than on any asset it owns except land — private primary and secondary fees compounding every year, then a university abroad denominated in a currency the family does not earn, then a master's degree, then the whole sequence again for the next child, and in most households for a nephew, a ward, and the brilliant daughter of a cousin who could not afford it.

It is the largest expenditure the family never structures.

The money is real and the intention is serious. But almost none of it sits inside an instrument. It is paid termly, out of income, at the discretion of whoever has it — which works while that person is alive, employed and well, and stops working entirely and at once when he is not.

The education trust is the instrument for this expenditure. It is the least glamorous vehicle in the family architecture and the one most Nigerian families would benefit from building first, because it addresses money they are already spending rather than wealth they hope to accumulate.

This essay sets out what an education trust is, the three questions that must be answered before it is drafted, the seven clauses that constitute its architecture, and the discipline that separates education funded as an investment from education paid as an entitlement. The essay on the second-generation question names that entitlement dynamic as one of the eight ways family wealth fails. This is the instrument that prevents it.

Three things are commonly mistaken for an education trust, and each fails in a way worth naming.

It is not a savings account with a sentimental name. An account held in the founder's name is his property; it forms part of his estate, freezes at his death, and is available to his creditors while he lives. The label on the account changes nothing about who owns the money.

It is not a clause in a will. A will speaks only from death, and then only after probate — and probate in Nigeria is measured in years while school terms are measured in months. A child whose fees depend on a will is a child whose education depends on the speed of a registry.

It is not an education endowment policy. An assurance policy pays a sum on a date or on a death. It does not decide anything: it cannot assess whether the course is serious, adapt to a beneficiary who changes direction, refuse a fourth attempt at the same degree, or respond to a child who has not yet been born. A policy is a source of funds. It is not a mechanism for judgment.

A policy pays. A will waits. Only a trust decides.

An education trust is a fund vested in a trustee, held for a defined class of beneficiaries, for a defined purpose, on defined conditions, with a stated rule for what happens when the purpose is exhausted. Everything difficult about it lives in the four definitions.

It takes one of two forms. It may be a standalone settlement, with its own deed, its own trustee and its own accounts — appropriate where no family trust yet exists, or where the settlor wants education funded by a distinct set of contributors, which is common where siblings pool for a generation of cousins. Or it may be a designated sub-fund within an existing family trust, which is cheaper to administer and produces one set of accounts, but which must be genuinely ring-fenced in the deed. A sub-fund that is not ring-fenced is not an education trust. It is an education intention competing with every other call on the same capital.

No education trust should be drafted before the family has answered three questions in writing. Each of them is uncomfortable, and the discomfort is the reason they are so often left to the trustee to resolve later, at the worst possible moment.

Who is a beneficiary? In a Nigerian family this is never a formality. The founder has been paying fees for a nephew for six years. A ward has been raised in the house since she was nine and is called a daughter by everyone in it. There may be a second household. There will certainly be grandchildren not yet born, and there may be a stepchild whose position nobody has ever stated aloud. Silence does not resolve any of this. It transfers the decision to a trustee who will have to make it in the month after the funeral, against the expectations of people who have every reason to believe they were included.

What is education? Left undefined, the word will supply twenty years of argument. Does it include a trade qualification, a professional examination, a conservatoire, a flight school? A second master's degree? A repeated year? A course in a country where the family has no relatives? The definition is not a matter of generosity. It is a matter of whether the trustee can say yes without inventing authority, and no without inventing a reason.

What happens to what is left? Every education trust eventually runs out of students. A fund with no residue clause becomes an orphan: capital held by a trustee whose purpose has been exhausted, in the hands of a family that has no agreed view of what it is now for. That is a dispute waiting for a date.

What follows is the architecture. Each clause is stated in terms of what it does, what it must contain, and the drafting decision it forces the family to take.

The seven clauses are the architecture. The discipline is something else, and it is what the sub-pillar was pointing at when it distinguished education funded as an investment from education paid as an entitlement.

The distinction is not the amount, and it is not even the conditions. It is whether the beneficiary is ever asked to account. An entitlement is received. An investment is applied for, granted, and reported on. In practice this means very little paperwork — an application before enrolment, a transcript at the end of each year, and a page describing what the beneficiary intends to do next.

The function of that page is not surveillance; a family trust is not an audit. Its function is to establish a relationship in which the beneficiary is a participant in the structure rather than a recipient of its output. A young person who has once had to explain to an institution what they propose to do with the family's money is a different adult from one who has only ever been given it. The essay on preparing the next generation treats that formation directly; the education trust is where it begins, because education is the first thing the structure ever does for a beneficiary.

There is an honest limit to state as well. An education trust cannot make a person want to study, and no clause has ever produced a scholar. What it can do is decline to make the alternative comfortable — which is a smaller claim than families usually make for money, and a more reliable one.

Fees paid without record produce a dependant. Fees paid against an application, a condition and a report produce a steward. The money is identical; the difference is entirely procedural.

Procedure is how a family transmits a value it can no longer supervise.

The instrument is available and the practice is ordinary. What follows is how a Nigerian family actually puts one in place.

Choose the form and the trustee. A substantial standalone fund is best held by a corporate trustee licensed by the Securities and Exchange Commission, whose administration continues across the settlor's death without interruption. A modest fund can be held by a professional trustee with the administrative support that makes a trust defensible — the meetings, resolutions, accounts and statements. What a family should not do is appoint the uncle who has always paid the fees. That arrangement is the existing practice with a deed stapled to it.

Fund it in three streams. An initial settlement of capital; a standing annual contribution while the founder is earning, which is the stream that actually builds the fund; and a life assurance policy written in trust, with proceeds payable to the trustee rather than into the estate. The third stream is the one most Nigerian families miss, and it is the one that matters most: it means that the founder's death accelerates the funding of the education instead of interrupting it in the middle of a term.

Size it by a coverage test rather than by a target figure. The fund is adequate when it can meet, out of income and defined capital at present cost, the committed obligations of every beneficiary currently in the system for the remainder of their courses, plus a stated margin. That test can be run every year, states an answer in the currency of the moment, and does not go stale the way a naira target does.

Then administer it on an academic calendar laid over the ordinary trust rhythm. Applications by a stated month. Decisions before acceptance deadlines. Disbursement to institutions. An annual meeting at which the accounts, the formula and the currency composition are reviewed together, and a beneficiary statement that treats the recipient as an intelligent adult with a legitimate interest in the structure.

Two boundaries are worth naming, because families routinely collapse them. Funding the education of the family is this instrument. Funding the education of the public is a foundation, and the two should not share a fund, because charitable purposes and family purposes are governed differently and audited differently. And funding a beneficiary is not the same as preparing one: the essay on preparing the next generation covers the work that no amount of well-drafted funding will do on its own.

Every Nigerian family with money is already funding education. Almost none of them is funding it through an instrument. The instrument does not increase the amount — it survives the founder, states the conditions, and keeps the record.

A family that funds education without a structure is buying degrees. A family that funds it through one is raising stewards.