Sexton 10.29 Educational Giving

Acts of generosity are beautiful things for the most part

, but there is a reason to proceed with caution when you are planning your estate for the good of your loved ones. In some cases, a gift or inheritance can be detrimental, causing more problems than providing benefits to your loved ones. Many feel as though the best course of action is to use your resources to give your loved ones an opportunity to help themselves, and one way that this can be achieved is through the giving of educational gifts.

Tax laws allow for the unlimited giving of gifts to pay for the education of the recipient free of the gift tax. There is a $1 million lifetime gift tax exclusion, but it is important to note that these educational gifts do not count against that exemption. Educational gifts must be paid directly to the institution and not to the student, and they can't be used for anything other than tuition. Books and living expenses cannot be gifted tax-free via an educational gift. However, there is also a $13,000-per-person annual gift tax exemption.

You can give up to $13,000 each year, tax free, to as many people as you would like. This does not impact your lifetime exemption amount. So if you wanted to, you could provide your heirs with gifts of as much as $13,000 per year to help them pay their expenses, and your spouse could do the same, elevating that number to a potential $26,000. Educational gift giving can present your loved ones with a clear pathway to unlimited success while avoiding a gift tax, though it is ultimately up to them to walk this path. In the future when they look back at their college years through the prism of a matured perspective, they will recognize the full value of your gift to them.

by: SextonLawAR

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