So my dad told me the other day that he and my mom will pay for my boys to get through college. I have a senior who’s already been accepted to a couple schools and a sophomore.
Has anyone been through this with their kids and parents and can maybe shed some light as to how this actually works? Do I just give them the tuition bill?? They paid for my sister to get through NYU about 15 years ago so they know what’s involved but I’m just a little worried
What a wonderful gift.
Would they be willing to gift the money to you and your husband…and then you pay the bills?
Yes - you simply give them the tuition bill and let them write the check.
Thanks. It just feels a little awkward handing them these large bills. I was all set to research loan options when they told me. I just hope to be able to do this one day for my grandkids.
Tuition is a lot more than it was 15 years ago. Are your parents aware of the full cost nowadays?
As long as the tuition checks clear, college isn’t going to care about who signed them.
I’d check with your CPA and have them check with their CPA. That is possibly the best gift anyone could ever give. That aside, if I were the “gifted” I would like to be able to write off the 14K ( or whatever it is) that can be gifted to anyone each year. Perhaps they don’t care about tax implications. But thinking of a couple of hundred thousand dollars or more could impact their estate as well. IRS rules can change but there are most definitely implications on one end or the other.
Agree with above posted about checking with a CPA. My in-laws give my son $5k a year towards his college costs (the whole thing would be great!!LOL), but were instructed to pay it directly to the institution. We don’t get paper bills - it’s all online through my son’s portal. I have access with my son’s user ID and password; when the bill posts, I send my in-laws instructions on where to send the check by what date. Paying the college directly benefits them somehow, and also doesn’t require us or my son to declare the money as income.
Be aware that if the grandparents pay the school, the student is required to report that payment on a future FAFSA when asked about gift money in the year the payment was made. For a student who does not receive federal or institutional grants, it won’t make a difference … but for those who do, it could impact aid. @thumper1 's suggestion allows the child to avoid reporting the gift (the parent is not asked about gift money paid to them).
Any money paid for your benefit for medical and education expenses that is paid directly to the provider (doctor, hospital, college, etc.) does not count as a gift as far as the IRS is concerned, and it does not matter if the amount in any one year exceeds the annual gift tax exclusion.
That said, it does count as a gift that would need to be reported on FAFSA question 45.j., but if the entire college bill is being footed by the grandparents, it probably doesn’t matter anyway.
Even though it’s a great gift have a conversation with them about the costs. What happens if something happens to them like death? Will your child be in their will so the tuition will still be paid or will you have to pay the rest? I know we don’t want to think about such things but we all do need some assurance incase you can’t afford where he will end up going.
Thanks everyone for your advice. My husband and I will need to have a sit down with them and go over everything. And thanks to those optimists who think we have a need for a CPA ?
My friends 3 kids all had tuition paid by grandparents. Grandparents put money in a separate account (in grandparents name) for each student that listed each of the kids as a beneficiary.
Grandparents paid school directly.
I’m not sure what type of account. But grandparents started account when kids were little so not sure if it was an educational account. But each kid knew what they had available at HS grad. First one opted for private out of state and used all funds for undergrade. Number 3 attending state school and plans to use left over funds for grad school.
All three kids also worked in college as they needed to pay for books and incidentals. Parents paid for housing and food.
The first shock you may have is that there isn’t always a ‘bill’ from the college. I had one at a private school and one at a public. No bills. The private school bill was due about a week before school started, which was mid-Aug. The public school bill was due 3 weeks after school started, in late September. You just had to go onto the portal and submit the payment. At first both schools took credit cards with no additional fees, but after a year the public school started charging 2-4%, so I started paying by ACH transfer. Daughter could have walked into the registrar with a check, but timing was tricky as they applied the FA and loans, but if she added of dropped a class the amount changed.
My friend’s father also pay for college. What gift!
The “poor man’s trust,” as some people call it. If your kids are the named beneficiaries, then it does not have to go through probate.
https://www.estateplanning.com/Do-All-Assets-Go-Through-Probate/