A college education is expensive, so it is no surprise that many grandparents want to do whatever they can to help their grandchildren pay for their degrees. There are different ways to do this though, and some of them are more efficient or effective than others. A Fayetteville, Arkansas estate planning lawyer can take a look at your assets and help you figure out which method would work best for paying your grandchild’s education expenses.
Why Do I Need an Estate Planning Lawyer?
An estate planning lawyer can help you figure out the best way to pay for your grandchild’s education expenses. It may not seem like it, but covering these expenses can come with a few complications. Depending on which method you choose, you could affect your grandchild’s application for financial aid. The tax burden on you or your family members could also change based on the method of payment chosen. So talk to our attorneys and find the best way to pay these expenses.
What Are Some Good Ways to Pay for My Grandchild’s Education?
There are a few methods of paying your grandchild’s education expenses that we can suggest. Some top options include:
529 plan: This is a state-sponsored plan that allows you to contribute funds with some tax advantages, and then those funds grow tax-deferred. The money can be withdrawn without worrying about a tax penalty or burden, provided that they are used solely for education expenses.
Trusts: There are a few different types of trusts that can be used to pay your grandchild’s education expenses. A minor’s trust is a good option, as long as the assets will be used before your grandchild turns 21. A Crummey trust can also work, especially if you have multiple grandchildren who can benefit. The funds you contribute are removed from your taxable estate. Trust contributions are considered a taxable gift to your grandchildren though, so you should be aware of annual limits and how gift taxes work.
Can I Pay for My Grandchild’s Education Directly?
You can do that. When the tuition bill comes due, you can simply pay it so that your child or grandchild does not have to pay the bill themselves. What is nice about this payment is that it is considered a gift and there will be no tax burden for your grandchild to worry about.
However, there are some problems with this method of payment. An obvious issue is that you could pass away before another tuition payment is due. You also cannot directly pay for your grandchild’s education expenses like room and board. Our estate planning lawyers can tell you about other ways to set aside the necessary funds and make sure that your grandchild’s education expenses are completely covered.
Schedule a Consultation Today
If you want to do everything that you can to make the most of your assets and help pay for a grandchild’s education expenses, we can help. Contact the Knapp Law Firm and ask to schedule a consultation. We can tell you more about what you can do with a comprehensive estate plan.