Although you could just pay for their college outright, utilizing the 529 plan makes more sense.
Stay with me on this and I will explain.
When trying to pay for college everyone should follow this three-part plan from college financial service company Sallie Mae: set up a savings account, contribute to it regularly, and explore options with tax advantages—including 529 plans.
If you have never heard of a 529 plan, you are in good company.
In fact, according to a recent article in thestreet.com, some 75% of families know nothing about this useful financial tool despite college debt being a huge issue in academia, the media, and American households.
The article is titled "Most Americans Don't Know What a College 529 Plan Is – And That's a Problem."
No wonder people are so concerned about paying for college. They are ignorant of their options to do so.
A 529 plan is used to pay qualified educational expenses at any U.S. and some foreign colleges.
This savings plan can be transferred from one generation to the next and will not expire.
What does this mean?
As a grandparent or parent, you can start saving for the "future" students in your life even before they are born.
What are things you need to consider?
Although you can purchase a 529 plan in any state, different states do have different college funding plans.
As a grandparent, you can superfund a 529 plan by donating five years of contributions—$70,000—at one time.
Although you may not be setting aside nearly that much money in a lumpsum, you can still help your grandchildren with college while benefitting your estate plan via lifetime gifting with this tax-deferred account.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: thestreet.com (May 22, 2016) "Most Americans Don't Know What a College 529 Plan Is – And That's a Problem"