Are you going to help your grandchildren pay for college?
Besides saving for their own retirements, many of our clients ask us to devise plans to help them finance their grandchildren’s educations.
This is hardly surprising, as a full 62 percent of people over the age of 50 already provide at least some level of financial support to a younger family member.
If you are in the position to help your grandkids pay for college, you need to do it right. Here are 4 ideas that should go a long way toward making the process smoother:
A 529 plan helps families pay for the cost of higher education. Some of the best features are:
Some 85% of grandparent-to-grandchild gifting is for education. If you make the contribution directly to the college or university your grandchild plans to attend, it won’t count against the gift tax. And if they change their mind or transfer to another school? You get your money back.
If you simply give the money to your grandchildren, it can be considered income and could impact their ability to receive financial aid. Plus, even the most disciplined young people might be prone to squandering a large chunk of money on vacations and concert tickets.
A way around this is to give the funds to the parents with the intention of helping pay for college expenses. Under the current tax law, the gift tax exemption is $14,000 per person each year.
Probably one of the easiest things to do would be to simply promise to help pay off your grandchild’s student loans after they graduate. Some advantages are:
College is expensive, but the gift of education is priceless. What better way to show your love and affection than to help fund your grandchild’s education?
For more information on ways to pay for college for a grandchild, talk to an advisor today.