Every fall is college application season, a time that creates worry among families about acceptance, decisions, declaring a major, and – most of all – figuring out how to pay for higher education. College is expensive no matter how you look at it, no matter where your grandchildren are accepted and decide to attend. Some people take the chance that scholarships might cover most fees, but it’s safer to do some savvy financial planning and be prepared for whatever might be ahead.
Choose the Smartest Financial Plan
Most grandparents are eager to help their grandchildren succeed. Whether you have one grandchild or many, whether they are going to college in a year or in a decade, it’s possible to create a financial plan that puts financial help wherever it’s needed most, when it’s needed most. There are several ways to save money to help your grandchild pursue their dreams.
529 Plans
Anyone can open a 529 plan for a designated child. Parents often open a 529 plan for each child, but grandparents can too, making this savings tool a great option for multigenerational financial planning.
- This savings plan is designed for future post-secondary education costs.
- It comes with tax advantages when used to pay for qualified education expenses at an eligible institution.
- A 529 plan can even be used to pay for student loans.
- Unused funds can be converted to a Roth IRA.
You may not know if your grandchild plans to go to college, art school, trade school, graduate school, or otherwise, but putting money aside for the good of their education is a smart, amazing gift.
Direct Tuition Payments
One way to ensure your resources go exactly where you want them to, grandparents can make tuition payments directly to their grandchild’s school. This straightforward option is not subject to gift tax and is a significant financial aid benefit to the grandchild.
Establish an Education Trust
Some grandparents opt to choose a living trust or education trust for your grandchild. This can happen during your estate planning or occur as a separate interaction.
- The management and distribution of assets to beneficiaries (the grandchild) can be done more easily and quickly.
- Assets can be distributed during your lifetime or after death.
- Wishes are specified in the trust agreement, and the trustee is obligated, legally, to honor them.
- The grandchild’s access to funds can be restricted regardless of their age.
- This option could incur fees or have tax implications.
Get Financial Support to Save for Your Grandchildren
Not every saving method is right for every grandparent. It’s important to have a conversation with your financial planner to determine the best saving strategy based on your grandchild’s needs and financial situation as well as your current expenses, money goals, and intentions for your family. For some families, several 529s are the way to go. For others, a living trust is the better choice.
There are several possibilities for saving and there is always one that will work for your assets and comfort level. Contact Hollander Lone Maxbauer in Southfield, MI, for help in creating a future that is bright for all the young people in your life.
