<p>Grandma agreed to contribute a set amount of dollars ($14K). How should she contribute this? She thinks she should pay the school directly. I heard here on the forums that she should gift the money to her Daughter (my Wife) and they my Wife would make whatever payments, whenever they were required. If the best way is to write the check to my Wife then I need reasons why so I can pass them on via my Wife to Grandma. My feeling is, now that she has committed, she should send it to my Wife to administer it. Otherwise my Wife will have to continually chase it in bits & pieces throughout the year. Also I just found out yesterday that our loan money won't be available for 90 days, so how elese are we going to make the first payments. </p>
<p>She should gift the money to the parents. Then the parents should pay the college bill. </p>
<p>OK, thanks but can you offer reasons why? </p>
<p>The reason is that there is no gift tax on $14000. If she pays the school directly, that money must be reported by the child as a gift on NEXT year’s FAFSA, or if she gives the money to the child it might be required to be reported. It will not be reported by the parents if it is spent before you fill out your next fafsa.</p>
<p>Depending on your income, you might not be getting any aid from through FAFSA, so it may not matter.</p>
<p>14K per year or 14K total? If total and she really wants to pay the school directly, she can wait until the last year of undergrad. If per year, gift your wife and have your wife then pay the bill. </p>
<p>I concur with twoin. If you are receiving FA, grandma paying the school directly or the child will adversely affect FA. I’m curious though about the amount grandma is willing to contribute. It seems like an unusual figure except that it happens to be exactly the gift tax annual exclusion amount. Is she willing to give more but thinks she is somehow limited to $14k because she’s afraid of a gift tax issue? If so, grandma should know that the $14k limit on annual gifts does not apply to tuition payments made directly to the educational institution. There is also an exclusion for that. For example, if child is attending a university that costs $60,000/year, grandma could pay the whole amount without creating a taxable gift as long as she pays the university directly. I have many wealthy clients who pay for their grandchildren’s college education this way. (I’m a trusts and estates lawyer.)</p>
<p>I agree with DGDz about the gift tax issue. However, if your DD is receiving other financial aid, if Grandma or anyone else pays the tuition directly, your student has to report it on FAFSA, and would almost certainly affect EFC and any need packages for the next year. By giving it to your wife, no such reporting issues are in the picture. She can also lend it directly to the student with proper loan documents, market interest provisions and payment of interest and forgive the loan after graduation. If your student is depending on this money, it would be wise for grandmom to make a codicil to her will or make some other arrangement so that if something should happen to her, the tuition help will continue through out the college years. </p>
<p>If she’s worried about the gift tax wouldn’t it be easier to give X to husband, Y to wife, and Z to child, where X + Y + Z can be more than 14K?</p>
<p>donnaleighg - I concur with that, if only she had 42 to give … ;)</p>
<p>IF $14K is what she wants to give, then she should give the $14K to your wife, with a stipulation that your wife immediately deposit it and write the check to the school that she can then send the copy to your MIL. Explain that your DD is getting money from the school and any money given to her could take that money away so that it has to be done this way, but that you and your wife will be happen to show that the money is indeed going directly to the school, and then do it that way Pay the school as soon as grandma’s check clears and let that credit stay in the Bursar’s account. No games in taking a piece here and there an paying the school what you need to pay them to stave off the late fees. Uh uhn. If I were Granny, I wouldn’t want those kind of games being done with the money I am giving towards school payment either. </p>
<p>ok interesting</p>
<p>Not accusing you of this, by the way Rumrunner. But that is something that is often in us old ladies’ head. That someone is going to use the money for something other than its intent. I know I get that way, and I’m not THAT old yet, with my kids, because, yes, there are times money given for a purpose makes detours before getting to where it was intended. And the older I get, the more suspicious I get of those things with some of my kids. Sometimes it does make financial sense to do that, but when it comes to other people’s money that you want, especially any future payments, it’s best you toe the line and can show very clearly that the check went as directly as possible to what it was intended to pay.</p>
<p>no worries, I understood, but understand even more clearly with your 2nd comment and I passed it on to the powers that be. that could be the clue I was looking for. thank you! </p>
<p>Is the grandmother committing to 14K per year or just the first year, and if something happens to her so that she CAN’T give it for the subsequent years (nursing home, needing costly medical interventions, stock market downturn, death) is the school still affordable?</p>
<p>14K 1st yr for #1, then thinking $10K each when # 2 gets in next yr. so that’s 20K to grandma next year. know it’s not a rock solid commitment but it’s amazingly generous. when she passes wifey and the kids get everything, if she hasn’t spent it by then. I’ve discussed options for preserving funds with wifey, but that’s a whole 'nother story and she gets overwhelmed, so 1 step at a time. </p>
<p>Make it easy for Grandmom to do this with verifications in place so she sees where the money is directly going. Us old women are a suspicious lot, LOL. But let her know why paying the school can end up a wash, the next year. I hope to be able to do the same if I’m even a live when my future grandkids get to that stage.</p>
<p>I’m in a very similar situation to Rumrunner. One difference is the school S is attending provides grant aid to cover costs between EFC and COA, and many of the EFC costs (as I understand it) won’t show up on the bill from the University (books, travel). I’m only anticipating a bill of 1-2K per semester after aid…and books/travel costs may run nearly as much. While we could pay the 14K to the university now and they would hold it and (I assume) refund anything unused after 4 years, I’d love to see the grandparents’ money used to cover some of those out-of-pocket expenses – but a bits-and-pieces approach would risk family harmony. Any variance in recommendation for us?</p>
<p>We resolved this one item. the school even candidly explained what’s in our best interest saying it happens so often it doesn’t make sense to pretend it doesn’t. Gma came up w 1st semester contribution to my wife.</p>