Using Your Estate Plan To Finance Education

Often grandparents want to help their grandchildren, but do not know how to accomplish this goal with their estate plan. One avenue that some advisors recommend grandparents pursue is funding their grandchildren’s education. Currently, a grandparent is permitted to gift $14,000 annually without having to worry about gift tax.

However, providing the funds directly to the educational institution is a way around that $14,000 limit because it is excluded from the exclusion amount. Additionally, a direct payment will not be subject to a generation skipping tax. Thus, a grandparent can directly pay for their grandchildren’s education and gift a sum of up to $14,000 in the same year.

Another alternative is to start a 529-college savings plan. One advantage of this plan is that even after the grandparent passes the plan will continue operation.

See Terri R. Stallard, The Gift of Education Re: Estate Planning, National Law Review, Nov. 17, 2013.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.