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How to help make college a reality for your grandchildren

By Suzie Sawyer //

According to the College Board, the average cost of tuition and fees for the 2014-2015 school year was $31,231 at private colleges, $9,139 for state residents at public colleges, and $22,958 for out-of-state residents attending public universities. With college tuition continually on the rise, many parents are finding it difficult to cover the costs, leaving their children saddled with student loan debt upon graduation.

As a result, a growing number of grandparents are helping their grandchildren pay for their education. If you’ve adequately saved for retirement and other financial goals, you may find assisting your grandchildren with their college savings to be a satisfying way to pass along your wealth. But there are many things for you to consider first.

One way you can help is by gifting cash or securities to your grandchild.  If the amount of your individual gift is less than $14,000 (or $28,000 for a gift made by a married couple), your gift will be exempt from federal gift tax. Your cash gift would, however, be counted as income for your grandchild, and could affect his or her financial aid eligibility.

Another option is to write a check directly to your grandchild’s college to pay for tuition. Under federal law, this is not considered a taxable gift and is therefore not subject to the annual federal gift tax exclusion, but it could affect your grandchild’s eligibility for financial aid.

If you have more time before your grandchild starts college, 529 College Savings Plans and Coverdell Education Savings Accounts are two popular savings options worth considering. Each has its own advantages and disadvantages, along with different income limits, age limits, contribution limits, tax treatments, investment options, and financial aid considerations. Your investment professional can help you determine if either option is best for you and your unique financial situation.

Investors should consider carefully the investment objectives, risks, and charges and expenses associated with a 529 College Savings Plan before investing or sending money. The official program offering statement, which includes information on municipal fund securities, is available from your financial advisor and should be read carefully before investing. The value of a 529 College Savings account may fluctuate, and there is no guarantee that any investment portfolio will achieve the stated goal. Your investment may be worth more or less than its original value.

Yet another option is a custodial account, such as a Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) account.  Again, such custodial accounts have benefits and drawbacks that you’ll want to discuss with your investment professional.

Before making any sort of contribution toward your grandchild’s college education, you will want to meet with your investment professional and tax advisor, since he or she will have valuable insight to your personal financial situation and could possibly offer alternatives or suggestions as to how you can make the most of your contribution. Furthermore, your tax advisor may also help you understand how your assistance to your grandchild’s education will affect your tax situation and the amount of financial aid your grandchild will qualify for.

Article provided by Suzie P. Sawyer, Managing Director/Investment Advisor Representative of Trinity Investment Services, LLC, who can be reached at (228) 864-4460.  Securities offered through Century Securities Associates, Inc.  Member SIPC and FINRA. A subsidiary of Stifel Financial Corp.

Home Office: 501 North Broadway, St. Louis, Missouri 63102, (314) 342-4051.