If you are a grandparent, you may have spent a fortune on heartfelt gifts and expensive outfits for your grandkids. However, there is another way you could be spending money on them. Even when they are young, it’s never too soon to think about contributing to your grandkid’s college savings plan. Here are some ways you can help your grandchildren pay for college:
529 College Savings Plans allow parents, grandparents, and other family members to put money into an account for a child’s educational costs. As long as these contributions are used for the child’s qualifying college expenses, they are typically not taxable. If one grandchild cannot use the funds, they are transferrable to his or her siblings and cousins without incurring taxes or penalties. Additionally, your grandchild does not have a time limit for using the account funds. Several states offer these plans, but they vary in terms of fees. You can open a 529 account in almost any state without being a resident. Before doing so, it would be best to research which state’s plans are ranked the highest.
Sometimes the best way to support your grandchildren is by paying or their college expenses directly. Under the current IRS regulations, you can pay up to $15,000 individually or $30,000 as a couple towards your grandchildren’s educational or other expenses without incurring gift tax. You also have the option of making a five-year-gift lump sum into their 529 accounts. However, unlike a 529 contribution, if you pay directly, you are not limited to certain expenses. For instance, if you want to use your gift to pay for your grandson’s car so he can get to and from class, it is completely up to you.
If you plan on leaving your grandchildren assets or funds, you could put them into a trust and name them as the beneficiaries. When creating the trust terms, you could specify that trust disbursements are to be used for your grandchild’s college expenses. If you prefer the money to be used to pay for tuition, books, and fees, you could include specific language to that effect. You could also condition payment according to your preferences. For instance, the trust could require that your grandchild maintain a certain GPA or being enrolled in a certain number of hours.
You can withdraw your contributions to your IRA at any age without consequence. However, if you take out your earnings before age 59.5, you will have to pay a ten percent penalty. But, when IRA account earnings are withdrawn by account holders who are over age 59.5, the individual does not have to pay a penalty. These funds can be an excellent resource for your grandchildren’s educational expenses.
With high student loan interest rates, many of today’s graduates face insurmountable debt as they try to get their careers and lives started after college. Student loans can be a financial burden to your grandchildren well into their adulthoods. One way to reward your grandkids’ educational achievements is by paying for their school loans. By taking some or all of the financial obligations off of your grandchildren, you can help them get off to a good start as they begin on their new lives.
One of the best ways to provide for your grandchildren’s education is through estate planning. You and your California estate planning attorney can review your estate and discuss your goals options for the future. With your counsel’s advice, you can examine the available methods that can work for you and your grandchildren.
At the Law Offices of Alice A. Salvo, we are California estate planning who can provide you with the advice you need to help provide for your grandchildren’s future. Please contact us online or by phone today to start your solution.