Finance

Helping Pay for your Grandchildren’s Education

Published

11 years ago

September 15, 2014

As the cost for a college education continues to climb, many grandparents are stepping in to help. This trend is expected to speed up as baby boomers, many of whom went to college, become grandparents and start gifting what’s predicted to be trillions of dollars over the coming decades.

“Helping to pay for a grandchild’s college education can deliver great personal satisfaction – and it’s a smart way for grandparents to pass on wealth without having to pay gift and estate taxes,” says Martin Walcoe EVP of David Lerner Associates.

So what are some ways to accomplish this goal?

Outright Cash Gift

A typical way for grandparents to help grandchildren with college expenses is to make an outright gift of cash or securities. But this technique has a few drawbacks. A gift of more than the annual federal gift tax exclusion amount–$14,000 for individual gifts and $28,000 for gifts made by a married couple– might have gift tax and generation-skipping transfer (GST) tax consequences (GST tax is an additional gift tax imposed on gifts made to someone who is more than one generation below you). Another drawback is that a cash gift to a student will be considered untaxed income by the federal government’s aid application, the FAFSA, and student income is evaluated at a rate of 50 %, which can impact financial aid qualification.

One workaround is for the grandparent to give the cash gift to the parent rather than the grandchild, since gifts to parents do not have to be reported as income on the FAFSA. Another solution is to wait until your grandchild finishes college then give a cash gift that can be used to pay off school loans. Yet another option is to pay the college directly.

Pay tuition straight to the college

Under federal law, tuition payments made directly to a college aren’t considered taxable gifts, regardless of how large the payment. So grandparents don’t need to worry about the $14,000 annual federal gift tax exclusion. But payments can only be made for tuition– room and board, books, fees, equipment, and other similar expenses don’t qualify. Aside from the obvious tax advantage, paying tuition directly to the college ensures that your money will be used for the education purpose you intended, plus it removes the money from your estate. And you are still free to give your grandchild a separate tax-free gift each year up to the $14,000 limit ($28,000 for joint gifts).

However, colleges will often reduce a student’s institutional financial aid by the amount of the grandparent’s payment. So before sending a check, ask the college how it will affect your grandchild’s eligibility for college-based aid. If your contribution will adversely affect your grandchild’s aid package, especially the scholarship or grant portion, consider gifting the money to your grandchild after graduation to help him or her pay off student loans.

529 plans

A 529 plan can be an outstanding way for grandparents to contribute to a grandchild’s college education, while simultaneously paring down their own estate. Contributions to a 529 plan grow tax deferred, and withdrawals used for the beneficiary’s qualified education expenses are completely tax free at the federal level (and generally at the state level too).

There are two types of 529 plans: college savings plans and prepaid tuition plans. College savings plans are individual investment-type accounts offered by nearly all states and managed by financial institutions. Funds can be used at any accredited college in the United States or abroad. Prepaid tuition plans allow prepayment of tuition at today’s prices for the limited group of colleges– typically in-state public colleges– that participate in the plan.

Grandparents can open a 529 account and name a grandchild as beneficiary (only one person can be listed as account owner, though) or they can contribute to an already existing 529 account. Grandparents can contribute a lump sum to a grandchild’s 529 account, or they can contribute smaller, regular amounts.

Concerning lump-sum gifts, a big advantage of 529 plans is that under special guidelines unique to 529 plans, individuals can make a single lump-sum gift to a 529 plan of up to $70,000 ($140,000 for joint gifts by married couples) and avoid federal gift tax. To do so, an unique election must be made to treat the gift as though it were made in equal installments over a five-year period, and no additional gifts could be made to the beneficiary during this time.

Example: Mr. and Mrs. Brady make a lump-sum contribution of $140,000 to their grandchild’s 529 plan in Year 1, electing to treat the gift as if it were made over 5 years. The result is they are considered to have made annual gifts of $28,000 ($14,000 each) in Years 1 through 5 ($140,000 / 5 years). Because the amount gifted by each grandparent is within the annual gift tax exclusion, the Bradys won’t owe any gift tax (assuming they don’t make any other gifts to this grandchild during the 5-year period). In Year 6, they can make another lump-sum input and repeat the process. In Year 11, they may do so again.

Significantly, this money is considered removed from the grandparents’ estate, although in the case of a grandparent-owned 529 account the grandparent would still retain control over the funds. There is a caveat, however. If a grandparent were to die during the five-year period, then a prorated portion of the contribution would be “recaptured” into the estate for estate tax purposes.

Example: In the previous example, if Mr. Brady were to die in Year 2, his total Year 1 and 2 contributions ($28,000) would be excluded from his estate. But the remaining portion attributed to him in Years 3, 4, and 5 ($42,000) would be included in his estate. The contributions credited to Mrs. Brady ($14,000 per year) would not be recaptured into the estate.

If grandparents want to open a 529 account for their grandchild, there are a few things to keep in mind. If you need to withdraw the money in the 529 account for something other than your grandchild’s college expenses– for example, for medical expenses or emergency purposes– there is a double consequence: the earnings portion of the withdrawal is subject to a 10 % penalty and will be taxed at your ordinary income tax rate. Also, funds in a grandparent-owned 529 account may still be factored in when determining Medicaid eligibility, unless these funds are specifically exempted by state law.

Regarding financial aid, grandparent-owned 529 accounts do not need to be listed as an asset on the federal government’s financial aid application, the FAFSA. However, distributions (withdrawals) from a grandparent-owned 529 plan are reported as untaxed income to the beneficiary (grandchild), and this income is assessed at 50 % by the FAFSA. By contrast, parent-owned 529 accounts are reported as a parent asset on the FAFSA (and assessed at 5.6 %) and distributions from parent-owned plans aren’t counted as student income. To avoid having the distribution from a grandparent-owned 529 account count as student income, one option is for the grandparent to delay taking a distribution from the 529 plan until any time after January 1 of the grandchild’s junior year of college (because there will be no more FAFSAs to fill out). Another option is for the grandparent to change the owner of the 529 account to the parent.

Colleges treat 529 plans differently for purposes of distributing their own financial aid. Generally, parent-owned and grandparent-owned 529 accounts are treated equally because colleges simply require a student to list all 529 plans for which he or she is the named beneficiary.

Note: Investors should think about the investment goals, risks, fees, and costs associated with 529 plans before investing. More information about specific 529 plans is available in each issuer’s official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits.

Private elementary/secondary school

If you’re interested in contributing to your grandchild’s private elementary or secondary school education, a Coverdell education savings account (ESA) is worth a look. You can contribute up to $2,000 per beneficiary each year to a Coverdell ESA. Like funds in a 529 plan, money in a Coverdell ESA grows tax deferred and is tax free at the federal and state level if used to pay the beneficiary’s qualified education expenses, which includes college along with private elementary and high school. However, there are income limits on who can add to a Coverdell ESA– married couples with a modified adjusted gross income over $220,000 ($110,000 for individuals) can’t contribute.

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Some of this material has been provided by Broadridge Investor Communications Solutions, Inc.

Member FINRA & SIPC

Related Topics:education granchildren Martin Walcoe

Up Next

Working During Retirement

Don't Miss

Is It Too Late to Save for Retirement?

Finance

AI and the Future of LinkedIn: How Technology is Redefining Professional Networking

Published

2 months ago

August 29, 2025

Good Life Guide

The tech industry has always been a proving ground for new tools and ideas, and right now one of the most powerful forces reshaping the way professionals connect is artificial intelligence. From the way companies recruit talent to how thought leaders build influence, AI is changing the rules of the game on LinkedIn and beyond.

Smarter Recruiting
Hiring managers no longer sift through stacks of résumés. AI-powered systems can analyze skills, career paths, and even cultural fit to recommend candidates. On LinkedIn, predictive recruiting tools help companies identify prospects before they start looking for a new role. The result is faster hiring and better matches between employers and employees.

Personalized Content Feeds
LinkedIn’s algorithm has grown into more than just a filter. It now functions as a learning engine that studies professional interests and behavior. For tech companies, this means employees and executives can reach the audiences that matter most. A thought leadership article, a product update, or even a short post can now land in the feeds of potential clients, investors, or collaborators with remarkable accuracy.

The Rise of Automated Outreach
Sales and business development teams are experimenting with AI-assisted outreach. Instead of sending hundreds of generic messages, companies can use tools that analyze profiles, identify key talking points, and create personalized introductions. While this raises questions about authenticity, it also makes networking more efficient and effective.

Data as a Strategic Asset
LinkedIn’s real strength lies in its data. Millions of profiles, skills, and career shifts create a powerful resource. With AI, companies can analyze that information at scale, spotting workforce trends, predicting which industries are about to grow, and even identifying where the next wave of innovation might emerge. For tech leaders, this kind of intelligence can shape everything from hiring strategies to market expansion.

Balancing Human and Machine
The challenge is keeping professional networking personal. AI can accelerate connections and refine the process, but relationships still depend on authenticity, trust, and shared experience. The tech industry, more than most, will need to find the right balance between automation and genuine human interaction.

As AI becomes part of the digital networking fabric, LinkedIn is evolving into more than a résumé platform. It is becoming a predictive, personalized ecosystem that reflects the future of work. For tech companies, learning how to use this shift to their advantage may be just as important as the innovations they are building.

Finance

PR and SEO Best Practices for Law Firms, Dentists, Wellness Companies, and Chiropractic Offices

Published

2 months ago

August 29, 2025

Good Life Guide

PR and SEO best practices for law firms, dentists, wellness companies, chiropractic offices

These days, your reputation often begins online before a client ever walks through your door. Whether you run a law office, a dental practice, a wellness brand, or a chiropractic clinic, people are searching the web to find answers, compare options, and decide who they can trust. That is where public relations and search engine optimization come together.

PR shapes your story and builds credibility. SEO makes sure the right people actually see it. When the two are aligned, they create a cycle of trust and visibility that fuels growth.

Why PR Matters for Professional Services
Public relations is not just about getting your name in print. It is about shaping perception. A thoughtful media mention, a quote in an article, or a published expert opinion can position you as someone worth listening to. For a lawyer, this might mean explaining a high-profile case in plain language for the public. For a dentist, it could be offering preventative care tips during National Dental Health Month. Chiropractors might focus on wellness and posture awareness, while wellness companies can shine by connecting their products to lifestyle conversations.

“PR is about storytelling,” says Mike Falkow, CEO at Meritus Media. “For industries like law and healthcare, it is often the difference between being just another listing online and being recognized as a trusted voice.”

How SEO Brings People to You
PR helps you look credible. SEO makes you visible. If you want new clients to find you when they type into Google, you need smart SEO strategies. That includes clear keywords, easy-to-navigate websites, local business listings, and reviews.

A law firm in Los Angeles that wants more personal injury clients has to show up when someone searches for “Los Angeles personal injury attorney.” A Tampa chiropractor has to be easy to find when someone types in “back pain relief near me.” It is not just about ranking higher, it is about meeting people right at the moment they need you.

Blending PR and SEO
Here is where the magic happens. When you land a feature in a credible publication, that mention often includes a link back to your website. Google sees that link as a vote of confidence, which boosts your search rankings. On the flip side, a blog post that is written with SEO in mind can get picked up and shared if it is timely and tied to bigger conversations in the media.

According to Meritus Media, “The mistake many professionals make is treating PR and SEO as separate projects. The truth is they amplify each other. Press mentions bring credibility and backlinks, and optimized content helps that coverage travel further.”

Best Practices for Each Industry

Law Firms: Build authority through thought leadership. Comment on relevant legal issues and create content around the cases and topics people are searching for.
Dentists: Focus on education. Share preventative care tips, encourage reviews, and make sure your practice shows up in local searches like “dentist near me.”
Wellness Companies: Lean into education-driven PR. Announce new research, highlight expert voices, and optimize for lifestyle searches such as “natural ways to boost energy.”
Chiropractic Offices: Become the go-to local expert. Host workshops, engage with local press, and use SEO to highlight treatments tied to specific conditions and locations.

The Takeaway
A strong digital presence requires more than just a website. It requires being seen, being trusted, and being remembered. For law firms, dentists, wellness companies, and chiropractic offices, the smartest approach is one where PR and SEO are not competing, but working together.

As Meritus Media puts it, “It is not enough to have an online presence. You need to be discoverable, credible, and memorable. That is the sweet spot where PR and SEO intersect.”

Finance

A Smarter Way to Save: Real Strategies That Actually Work

Published

2 months ago

August 4, 2025

Good Life Guide

Saving money often feels like something we should be doing, but somehow never quite master. Not because we lack discipline or financial know-how, but because most of us were never taught to approach saving in a way that feels organic and sustainable.

Forget the lectures about willpower. Think of saving more like tending a garden. You don’t expect a harvest overnight. You plant, water, and trust that something is growing under the surface.

Why Saving Feels Difficult

At its core, saving is about delayed gratification. You put money aside today for something you won’t enjoy until tomorrow. That can feel abstract and unsatisfying in a world where we’re used to quick wins.

Add to that the wear and tear of everyday decision-making. By the time you’re deciding whether to stash a hundred dollars or buy something impulsively, your mental energy is already spent. The easier option usually wins.

It’s not a character flaw. It’s a missing system.

Common Pitfalls That Derail Saving

One of the biggest traps is not knowing where your money is actually going. Subscription services, late-night shopping, and small indulgences add up fast.

Then there’s the issue of unclear goals. If you’re just “trying to save more,” it’s too vague to build momentum. Without a target, it’s hard to feel like you’re making progress.

Finally, many people treat saving as something they do only when it feels convenient. And as we all know, those moments rarely come around.

Simple Strategies That Actually Work

Start by making saving automatic. Set up recurring transfers to a separate account, even if it’s just fifty dollars a month. According to David Lerner Associates, automating your savings creates consistency without requiring daily effort. You don’t have to think about it—it just happens.

Next, tie your savings to something that matters to you. A trip. A safety net. A home project. As Martin Walcoe, CEO of David Lerner Associates, explains: “Saving works best when it’s connected to a goal you care about. Whether it’s building financial security or planning for something joyful, people are more likely to stick with it when it feels personal and meaningful.”

Small wins also build momentum. Consider using a round-up app that sweeps change from purchases into savings. Or throw spare change into a jar. These little actions remind you that progress doesn’t have to be dramatic to be meaningful.

Make Budgeting Feel Less Like a Chore

Instead of thinking of budgeting as a restriction, think of it as guidance. Look at your spending once a month. Track where your money goes. Treat savings like a bill—something you pay no matter what. Then adjust as needed.

Financial planning, like nutrition or exercise, is more effective when it fits into your natural rhythm rather than disrupting it.

Think Long-Term, Even in Small Steps

If you’re carrying debt, make a plan that works without pressure. Focus on understanding your terms and building a slow but steady path out. Saving and repaying can happen side by side. As Martin Walcoe puts it, “Finding the balance between repaying student loans, saving for the future, and investing is possible. With a proactive approach and the right strategies, you can tackle your loans while laying a strong foundation for financial growth.”

Even modest investing can pay off if you start early. Time does a lot of the heavy lifting. You don’t have to do it all—you just have to start.

Your Environment Shapes Your Habits

Surround yourself with people who share your mindset. Having a spouse, friend, or coworker on a similar journey can make saving feel more like teamwork and less like sacrifice.

And don’t overlook the importance of rituals. A monthly money check-in. A progress tracker. A celebration when you hit a milestone. These things help make saving part of your lifestyle rather than something separate from it.

Final Thought

Saving doesn’t have to feel like denial or discipline. When it’s tied to your values and built into your everyday life, it becomes a natural act of self-respect. Like nourishing your body, saving is an investment in the kind of life you want to live—not someday, but starting now.