College Planning & Financial Aid

One strategy is where the grandparents can help the grandchildren's education by making a gift under the Uniform Gifts to Minors Act. Each grandparent can give up to $13,000 per child annually free of gift tax, which should be placed in a UGMA bank account in the grandchild's name, with the grandparent or parent as custodian. Another strategy is for the grandparents to purchase Series EE or Series I bonds, or give the money to the grandchild's parent (who must be at least age 24) to buy the bonds. If the bonds are later cashed and the money used to pay qualified college education costs for the grandchild, the interest will not be taxed. The exclusion is phased out for high income taxpayers. Maximum annual purchases of Series I or Series EE are $30,000. Series I bonds also include the feature of being indexed to inflation. Speak to your local CPA about these tax saving strategies.