There is no doubt that college is one of the most significant investments that individuals make. According to the Department of Labor, the price index for college tuition grew twice as quickly as the consumer price index since 2003.
When your children are facing financial challenges associated with paying for your grandchildren’s college education, concerned grandparents may want to step in by helping with these costs. Using some plans like a 529 savings plan can be beneficial.
These plans can be used to help with qualified higher education expenses like fees, books, tuition and some room and board expenses. In the event that any funds are used for non-qualifying expenses, however, a 10% tax penalty and federal taxes do apply. 529 plans also receive what’s known as favorable treatment for the purposes of a student wanting to receive federal financial aid assistance. It is a good idea for grandparents to consider how separate gifts to their various grandchildren can impact their overall estate planning.
One of the most common issues is fairness as not all grandchildren may have the same financial need. Unequal treatment among grandchildren can cause anger and resentment. It is also important for grandparents to carefully consider their own future needs for long-term care. Nursing home care or private at-home care from a caretaker can be costly so you need to balance these potential needs with supporting your grandchildren. Consult a knowledgeable New Jersey elder law attorney today.