Best way to pay college tuition by a divorced parent?
Divorced parent wants to pay college tuition. Is it better to give money directly to student following gift rules or to open a new 529 account? Other parent already has a custodial account for the student. Both options have been suggested. Deadline approaching. Thank you.
Terry Says
Are you talking about paying tuition immediately — or saving up for college in the future.
Do NOT give a gift to the student in any case. It weighs very heavily against the family (divorced parents’ income and assets count) in the financial aid formula. And a child’s assets weigh 7x more heavily against you in the aid formula.
If the child is headed off to college, pay the bursar directly. That way you can keep track of your payments.
If you’re talking about saving up for college, then immediately open a 529 account with yourself as custodian, and keep making a contribution over the years until the time comes to use the money.
Read this column: https://www.terrysavage.com/529-plans-even-better-now-2/
And yes, even if one parent has opened a plan, there can be a second plan for the same child, with a different parent as custodian. If you live in Illinois there is a tax deduction for up to $10,000 of contributions if you open the account in the Illinois plan at www.BrightStart.com.
The money grows to be used tax-FREE for college in any state.
