Steps to Help Your Grandchildren Pay For Education Expenses

These are the steps Edward needs to follow to help their grandchildren with education expenses: 

1. Defining the Goal

Edward loves all 4 grandchildren equally and wants to keep all financial gifts equal to avoid any family conflicts. He wants to ensure any money he provides goes towards education expenses only. They also want to consider the possibility that they have more grandchildren down the road.

2. Running The Numbers

Edward and Claire first must prioritize their financial needs and ensure generosity doesn’t jeopardize their retirement. An undesirable scenario would be for them to give financial support to their grandchildren now, and then run out of money later and have to rely on their children or grandchildren to take care of them. They calculated an annual amount of gifts that don’t impede their living expenses.

3. Structuring the Gift

Two of Edward and Claire’s grandchildren are enrolled in public school and likely will continue in the district through graduation. Edward and Claire opened 529 plan accounts for both of the grandchildren. This allows them to start contributing now, invest in the gifts so they can grow, and ensure the funds are used for educational purposes.
The other two grandchildren live in a less desirable district and will be attending a private school. Rather than opening 529 plans for them, Edward and Claire make the same contribution directly to their private school to help cover the tuition.

4. The Flexibility

The funds from a 529 plan can be used to pay for education costs for K-12 schooling in addition to college.
Education expenses paid directly to the institution don’t count as a ‘gift’ for tax purposes. There is an annual gifting limit, currently $15,000 per person, that you can give to someone who isn’t your dependent without incurring gift tax.

Resources if You’re Looking to Help Cover Education Expenses 

Wealth Manager:

Your retirement years should feel shiny and bright! Taking the right steps early will help you look forward to retirement, and work hard to get there. If you plan extra well, you might have some income to spare to help your family, in this case, your grandchildren. For some, this extra income may come as a surprise, but you can make sure to include extra income in your retirement plan from the start, to make sure the extra income is there as you reach retirement. 

When it comes to proper financial planning, your best bet is to hire a wealth advisor that has your best interest in mind. The right advisor will make sure you are on track to meet your financial goals, whatever they may be. 

College Planning in Summary

College planning affects everyone, regardless of income, savings, or abilities… and there is no one size fits all solution. Education planning looks different depending on your life stage, goals, and financial situation.

• Starting early produces the best results when it comes to savings.
• Being resourceful produces the best opportunities when it comes to financial aid.
• Being diligent produces the best potential when it comes to achieving your goals.

The key is defining what your goal is and then mapping a path to achieve it.