So much misinformation in this thread.
Payments made to schools are not gifts — but daycare and summer camp are not schools. Yes you can advance fund a 529 with 5 years contributions but then you cannot give further gifts to that person for 5 years without filing a gift tax return. Really though if your parents are well off and looking to help you don’t need to worry about any of this. If your parents are paying for college it doesn’t really matter if they cash flow it or use a 529. |
If it's in a 529 it's safe from estate taxes should OP's parents die before her child goes to college. |
If a grandparent directly pays for a product or service for the benefit of a grandchild it is not subject to gift tax or counted against the lifetime gift tax exclusion.
If you aren’t clear on this, ask a tax accountant before you give, not internet random people |
Education!!!
Start a 529 and have the grandparents fund it now. Each grandparent can gift each kid $18K/year. So your parents can put $36K/year into a 529 for each kid (if you have future kids). Look into it, you can also superfund a 529 with 5 years worth of gifting immediately. Reason for 529---it grows tax free. Over 18+ years that is a huge advantage. They can also pay for private school directly and I believe it doesn't count as a "gift". |
you cannot fund a Roth IRA until the kid has earned W2 income (or declared income) But that is a good thing to do once they have a job. Gift them $$ to fully fund their Roth and 401K (once in a job with 401K) |
Check, but I think you can only use $10K max for K-12 education. "Payments made directly from a person to an educational institution that are used for tuition, not room and board, just tuition, those payments are not deemed a taxable gift. Sometimes these are called 2503(e) gifts." (from googling) So beyond the 529 $10K, your parents can pay directly for tuition for K-12 and it's not a gift |
Grandparents that have enough to fully fund the gk education may likely be concerned about their lifetime gift tax exemptions. Goal typically is to find ways to use the money now that does NOT count agains that lifetime exemption. |
Technically, they can gift the daughter, the Son-In-Law (spouse) and their Grandkid each $36K/year. So they can gift $108K per year to the family without issues. And then utilize the paying tuition for private school directly once kid hits K+ and it doesn't count against the $36K. It's a great way to reduce estate taxes in the future, if you are HNW/UHNW |
+1000 Also Not OP |
Tax advantages. That money can grow tax free until you use it. That's 18+ years. They can continue adding to the 529 yearly, even more than needed, and let it be used for med school/law school/the grandkids own kids 36+ years from now. All while it grows tax free. Now there are Aggregate contribution limits for 529 plans in each state (this ranges from 235k to 550k---note this is not the balance, but the Contributions over time). But that is easily solved by opening a 2nd 529 in a different state plan. There are plenty of good plans with low fees that have good investment options. Select your own funds, don't do a "my kid will graduate HS in 20XY" plan. Keep the choices aggressive until they are 14/15. |
Jeeezzz, she has a trust. Her parents plan to give her the money, she just is trying to figure out the best ways to do it for a kid. As posters have mentioned, there are many ways to pay direct for things and it's not considered a "Gift". hNW/UHNW families work hard to ensure they gift as much as possible while they are alive to reduce their estate tax amounts. They also often smartly realize that the money has much more impact when kid/family is young than once the kid is 50 and grandkids are 20. |
Technically it "doesn't matter". But most rich people are looking for ways to minimize tax payments. So a 529 does just that. tax free growth for 18+ years. Why not take advantage of everything offered to everyone? |
Yearly gift checks for all of you, paying for school, my in laws bought our house outright. I know you said you aren’t sure how much they have but if you’re talking in the tens and tens of millions, they really should start funding things regularly. Assuming they have a team overseeing their estate, there are many ways to help you both in the present and into the future. |
But you see how it sounds like someone is trying to get their greasy grubs on their IL's money, and coming here for suggestions? |
She said she was so sleep deprived at just having a newborn…normal people focus on their new kid, they don’t immediately come to DCUM to ask the best way to milk their parents. Maybe give it 6 months? |