Recent news of the Supreme Court having struck down the President’s plan to forgive student loan debt has returned the need for grandparents’ help (sooner rather than later) to the agenda of many estate planning discussions. “Borrowers around the country are still reeling,” a Financial Planning article begins, referring to the plan to cancel $10,000 to $20,000 of student loan debt for qualified borrowers.
In fact, as our attorneys at Geyer Law help clients provide for their own future needs and plan to leave legacies to people and to causes of their choice, it seems to be happening more often. Education funding challenges facing children and grandchildren are demanding seniors’ attention right now! Meanwhile, recent graduates starting their careers must consider how they can balance paying down student loans while still beginning to save for retirement.
Many grandparents have helped grandchildren pay for college through 529 college savings plans; others have made direct tuition gifts to a grandchild’s school, taking advantage of a special tax-code exemption which provides for unlimited gift amounts for the benefit of a beneficiary if paid directly to an educational institution. Many took advantage of the annual exclusion from gift tax (currently $17,000) to help grandchildren fund college expenses. With all that, many grandchildren still face the challenge of substantial remaining student loan debt.
Accrued interest capitalizes upon graduation and becomes part of the principal, Ann Mari Yager wrote in USNews, meaning that when the borrower enters repayment, he or she will have a balance that is larger than the amount that was borrowed to attend school. Grandparents might consider contributing funds to pay off any interest that has accrued, she suggested.
“Battles over relief for college debt are complicated and contentious,” a letter to the editor of the New York Times begins. “Has the quality of our higher education tracked these rising costs?” No matter on which philosophical or legal side of that question grandparents find themselves, our goal at Geyer Law is to help grandparents who want to help their grandchildren incorporate college funding (both before and after-the-fact) into their own estate and tax planning..
– by Ronnie of the Rebecca W. Geyer & Associates blog team
