Gifts for Now & Later
year? Worried about what to give kids who have every toy ever made, or teenagers who are, to say the least, hard to buy for? If you’re like me, the holidays are both joyous and stressful. You’re anxious to see family happy and hoping you’ve found just the right gift for everyone. I’ve been known to pull out the presents I’d bought through- out the year to inventory who was getting what and making sure I was happy with my stash. This was especially challenging for my nephews who had more toys than anyone I knew. Grandparents can proba- bly relate to my dilemma. Well, here’s an idea for anyone in this
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situation. For younger children, consider giving a less expensive gift to open and then taking the rest of what you planned to spend and contributing that money to an education account. You still get the pleasure of watching faces light up while wrapping paper flies through the air like confetti. Even better, you help your grand- child, niece, nephew, etc pay for college later in life. Okay, you won’t get the same level of excitement for this one, but it can make you feel good about it. For relatives in their early teens, you
can do something similar, although you’re likely to get more eye-rolls than excite- ment. You might want to combine a “con- trolled” shopping excursion with the edu- cation gift. As the cost of a college educa- tion continues to climb, many grandpar- ents are stepping in to help. This trend is expected to continue as baby boomers become grandparents and start gifting
h the joys of the holidays are upon us. Do you ever feel more stress than joy some days this time of the
what’s predicted to be trillions of dollars over the coming decades. Helping to pay for a grandchild’s college education can bring great personal satisfaction. A common way to help with college costs is to make an outright gift of cash or securities. But this method has drawbacks. If you gift the money directly to your grandchild, he or she might spend it on something other than college. Unfortu- nately for students, a social life is not considered an education expense for this purpose! You also need to be aware of potential gift tax or generation-skipping transfer tax consequences. Another draw- back to outright gifts is that a gift becomes an asset of the student, and the federal government treats student assets more harshly than parent assets for financial aid purposes. There are several
$ types of options
available for grandparents to consider. Some education plans allow the money to grow tax deferred and withdrawals used for the beneficiary’s qualified education expenses can be tax-free at the state and federal level. Specifically, there are some caveats that apply to tax-free distributions
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that you should be aware of. Is this too good to be true? Yes, there are plenty of things to consider when opening any type of account. You should always consider the investment objectives, risks, charges and expenses associated with any account before investing. Also, you will want to speak with your tax pre- parer concerning possible state tax benefits prior to opening an account. Even though you are giving to your grandchild, you can get multiple benefits too. Explore all op- tions. They won’t be gift-wrapped and waiting under the tree, but every bit counts.
If the words of warning above concern
you, or if you have a grandchild already in college, here’s one last option to discuss. You could pay the college directly. Under federal law, tuition payments made di- rectly to a college aren’t considered tax- able gifts, no matter how large the pay- ment. But this is true only for tuition – room and board, books, fees, equipment and other similar expenses don’t qualify. So, what’s the drawback in this situation? Colleges will often reduce a student’s fi- nancial aid by the amount of the grandpar- ent’s payment. If your contribution will adversely affect your grandchild’s financial aid package, another option is to give the money to your grandchild after graduation to help pay off student loans. So as the holidays pass and homes
return to the normal chaos, you can reflect on events differently this year. You “wowed” your family with gifts for now – presents for the present – and you have started gifts for the future. Whose gifts? Yours of course! On graduation day, it will be like the holidays all over again.
Cameron Aydlett, CFP®, ChFC® is a Finan- cial Planner with Triad Financial Advisors, 333 N. Greene St., Ste 506, Greensboro, NC 27401,
www.trifiadv.com, She can be reached at 336-230-0071 or caydlett@
trifiadv.com. As individual circumstances vary, please consult a professional regarding all college savings decisions. Investment advisory services offered through
Triad Financial Advisors, Inc. a Registered Invest- ment Advisor. Securities offered through Royal Al- liance Associates, Inc., member FINRA/SIPC and not affiliated with Triad Financial Advisors.
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