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Grandparents Can Help with Higher Education Costs

Published by Adam Hale on 25 Jul 2014

As a parent and grandparent you want your children and grandchildren to succeed in life.  Sometimes that means helping pay for their education. As you already know, education can be very expensive.

There are a few different way that you can contribute to your grandchildren’s higher education. However, though there are several different ways to help out, each way has its own limitations and tax consequences. Here are some ways you can contribute to your grandchild’s education.

Tax Advisor* GIFTS. The simplest way is to make an outright cash gift to your grandchild each year. In 2014, you can give up to $14,000 without any gift tax liability. If your spouse joins in the gift, you can jointly give each grandchild up to $28,000 each year.

* DIRECT PAYMENTS. You can give unlimited amounts without gift tax consequences if you make the payments directly to a qualified education institution on behalf of your grandchild. However, these payments can only be for tuition, not for dorm fees, meals, books, etc.

* EDUCATION ACCOUNTS. You could set up a Coverdell education savings account or a Section 529 plan for your grandchild. These plans offer tax-free growth of amounts you contribute to them. However, some limits do apply, such as age, income, and contribution limits.

When you contribute to your grandchild’s education it’s a good idea to work this into your annual tax planning to ensure that you have the plan that best fits your needs.

If you need to adjust your annual tax plan contact our office at (260) 497-9761 to schedule an appointment with our tax advisors. We can assist you with a plan that will fit your financial needs. 

                                              

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