Paying for some or all of your grandchildren’s college education is one of the most valuable gifts you can make. (Helping to pay for an adult child’s continuing education is another.) The gift of education opens up a world of opportunity and, in essence, lasts a lifetime. It is also like making a generous gift to your own children, because it helps alleviate their concerns regarding how to pay for the education of their children. And when you make your gift using certain gifting strategies, providing for your grandchildren’s college tuition can be an effective estate planning tool.
So, how should you go about making such a gift? One way is to just give your grandchildren all or part of the money to cover the cost of tuition. Given that the gift tax exclusion currently sits at $14,000 a year for individuals and $28,000 for married couples, you could make a gift capable of meeting the tuition requirements for most colleges and universities. Of course, there’s a risk involved in simply giving your grandchildren the money directly. You have to be sure that they will indeed use the money for their education, as opposed to, say, “finding themselves” by taking a lengthy backpacking trip through Europe.
When making a gift of any kind, you must also concern yourself with the laws governing gifting, particular the five year look-back period for Medi-Cal eligibility to pay for nursing home care.
Next week, we’ll discuss some safer approaches to providing the gift of education.
