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Helping grandkids go to college

Most Kent area residents know how important education is to a person's success in life. When a person is blessed with the means to contribute to a family member's higher education it can mean a world of difference to the recipient. Many grandparents are interested in ways of helping their heirs attend college.

College expenses are extremely high for most students. Students graduating from college are carrying thousands of dollars of loans and other debt with them while they try to search for jobs. Grandparents may feel like they would like to help their grandkids with college expenses if they have the means. One way for grandparents to help is to contribute to a 529 savings plan. A family member can contribute up to $14,000/year or $28,000/year if you're married to a 529 plan without filing a gift tax return. This can help reduce a couple's estate to avoid estate taxes. Another benefit of a 529 plan is that assets held in a grandparent's plan are not counted toward a student's financial aid benefit.

Other ways for grandparents to contribute to their grandchildren's college education include paying for the bill themselves. Tuition payments directly to the college are not considered gifts so the grandparents would not have to file a gift tax return. Grandparents can also set up a custodial account and, once the child reaches age of majority, they can use the money for their college education. This money is taken into consideration for financial aid. Grandparents can also help pay off the student loans but those payments are considered gifts. Payments should be limited to $14,000/year or $28,000 if married.

Grandparents understand how important a college education is for their grandchildren and they know how expensive this education can be. Helping a grandchild pay for college is a great way to ensure they have a successful future and to reduce a grandparent's estate as another estate planning tool.

Source: Kiplinger.com, "6 ways to help the grandkids pay for college", Sandra Block, June 2015

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