Massachusetts Estate Planning & Asset Protection Blog

Grandparents Can Help Their Family With College Bills

Posted by Dennis Sullivan & Associates on Mon, May 09, 2011

If you are a grandparent wanting to help your grandchildren with the future costs of college tuition, pay attention now. Recent tax changes are making it easier for you to help pay education bills for your grandchildren – and even future generations. The generous exemption increases in the federal gift and generation-skipping taxes are in effect now through 2012. Most experts believe this federal generosity may be short-lived, so now may be an excellent time to plan.

Tuition rates are rising steadily, and helping your grandchildren (or great grandchildren) obtain a good education without the burden of hefty loans is an excellent way to give them a “leg up” in the world. Finding a tax-savvy way of doing it is even better – especially for you!

Directly paying tuition is the simplest technique, and the most efficient. A grandparent is allowed to pay an unlimited amount of their grandchild’s tuition directly to the school without incurring the gift tax or eating away at their gift tax exemption and, if you’re looking at a school like Harvard, this also could be a potent estate reduction technique. Some schools also allow you to pay upfront for all four years, lock-in tuition rates, and avoid future increases (pre-paying tuition does not guarantee admission).

A less direct route comes in the form of 529 college-savings plans, by which you plug money into a trust especially designed for education. The advantage here is that the 529 plan can outlive you, and for that reason can serve as the better model if you are funding a toddler’s future education. This grants greater leverage but there are, of course, tax liability and ownership issues. For more information, download our

Attending one of our Trust, Estate & Asset Protection workshops is a good starting point, but you are well-advised to seek competent counsel before giving away any assets or establishing any type of irrevocable planning.

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Tags: family, 529 plans, college planning, estate reduction

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