Monday, May 1, 2017

Investing in Knowledge; Planning for your Children’s Education

College tuition is no joke. The costs for the pursuit of higher education continue to climb and will likely continue to cripple parents who intend to help pay for their children’s tuition as well as most of us who still haven’t figured out a way to repay our student loan debt. While it may be a little too late for some of us, it doesn’t have to be too late for our children.


At Warshaw, DiCarlo, we love to help young parents plan, create goals, and come up with creative solutions to fund our client’schildren’s education. In addition to creating children’s trusts to provide for education, one of our other favorite strategies is working with grandparents! Most grandparents don’t realize it, but grandparents can be the difference maker by contributing to their grandchildren’s education. While the ultimate beneficiaries of these plans are their grandchildren, grandparents are also able to simultaneously benefit from their contributions by paring down their own estate. A couple of ways grandparents can help are briefly outlined below:


529 Plans or Similar Education Savings Accounts Plans

A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. This is a great overall tool since these accounts function like a Roth IRA, where profits from stocks, mutual funds, or bonds stay in the plan. Taxes are only paid on profits when money is taken out for non-education or non-qualified education purposes. Grandparents can contribute up to $28,000 per couple, yearly without any tax consequences. Additionally, grandparents can make a single lump-sum contribution of $70,000 to a 529 account  ($140,000 per couple) by making a special election to treat the lump sum as an installment payment over a five-year period. The best feature of the plan is that anyone can actually contribute to these types of accounts, so the next time a child has a birthday party, baptism, confirmation, bar mitzvah, etc., friends and family can put money into the 529 plan.



Grandparents can also reduce their estate by giving cash gifts to their grandchildren. Grandparents can contribute up to $28,000 per couple, yearly without any tax consequences. This has the most flexibility as the grandchildren can use the funds for tuition, room and board, or living expenses. Grandparents can continue to contribute cash gifts even after their grandchildren have finished college if they choose to help with paying off student loan debt.


While most financial institutions will be able to assist in 529 plans and gifting, our planning incorporates these strategies into our clients’ overall estate plan and documents. 529 plans are instituted by financial institutions on forms and terms the institutions provide. Since every family’s situation vary, what many families may not consider are certain unintended and undesirable consequences. For more information on how we can help plan, contemplate, and work through these possible consequences, and  to truly have an integrated estate plan, contact us!

-Attorney Virgilio Ong

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