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As the costs of undergraduate and post-graduate education for some colleges rise, parents are tasked with navigating their own retirement, maintaining their day-to day expenses, along with securing and allocating financial resources to pay for their children’s education. Some grandparents also recognize this conundrum and create plans to help their grandchildren achieve these academic goals.

There is an advantage to knowing many of the important questions to ask when starting the college planning process: What is the best savings vehicle for the family? Will this savings impact the student’s financial aid eligibility? Can I fund college with gifts I make to my children or grandchildren in trust or outright? Can a grandparent pay tuition directly to a college? What if the student receives a scholarship? What if the child does not attend college? These questions often prompt parents and grandparents to grapple with myriad possibilities and priorities that shape what college savings strategies make the most sense for each family. This contemplation is often built around factors connected to tax and estate treatment, control of the account, income restrictions, beneficiary changes, age restrictions, maximum investment amounts, complexity, protection from creditors, impact on financial aid, distribution terms, qualified expenses, flexibility for needs outside of education, contribution limits, student incentives, penalties, investment options, fees, and set-up costs.

With so many variables at play, it often takes an education just to plan for higher education, so that stakeholders feel confident that their student is getting the right academic experience at the right cost. After all, the investment in a college education can be one of the largest a family will make next to the purchase of a family home.

Planning early is key

Like any financial goal, planning in advance can be the key to achieving the desired outcome. Many parents and grandparents begin thinking about college planning at the time of the child’s birth, while others put if off until they have built up their financial resources. An early determination of what matters most to the donor and the pros and cons of various investment options can be a quality starting point. These efforts, when communicated between the parent and grandparent generations, can help set a strategy that is best for your family.

Please see important disclosures at the end of the article.

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