College Planning Pays for High-Net-Worth Families

College is a significant investment for families. However, it is often considered worthwhile, with college graduates averaging $1.2 million more over their lifetime earnings than non-graduates, according to the Association of Public & Land-Grant Universities. Luckily, opportunities to help pay for college abound, from scholarships to grants to loans.  

However, for high-net-worth families, navigating the cost of tuition is becoming more challenging as they face the possibility that their children may not qualify for need-based financial aid. Education planning is crucial to easing this expense and helping their children attend their choice of schools.  

Here are six tips to keep in mind on your family’s college planning journey:  

Don’t skip the FAFSA  

Recent changes to the Free Application for Federal Student Aid (FAFSA) may make college more expensive for high- and middle-income earners, as the formula to figure out how much financial aid a student is eligible for has changed.  

Yet, it’s still a good idea to file a FAFSA, as it’s often a requirement for merit-based student aid, including scholarships and grants.   

Pursue scholarships independent of the FAFSA  

Speaking of scholarships, many schools offer more opportunities for merit-based financial aid than need-based financial aid. However, the availability of merit-based aid will vary from school to school and student by student. Choosing a school that offers merit-based scholarships and grants is one way to offset the cost of an education.  

 Other scholarships may be available due to participation in local or national organizations, athletic or artistic talent, or a myriad of other reasons. Most scholarships only cover a fraction of a student’s tuition, but pursuing multiple scholarships can dampen the impact of educational expenses.  

 Save in advance in tax-deferred accounts  

Saving to cover the expenses of a child’s education, as one would save to fund retirement or any other major expense, is a prudent course, and there are several tools at the disposal of high-net-worth families to help save for college.  

 A 529 plan enables tax-efficient savings for education. Assets go into the account after tax, are invested and grow tax-free, and can be distributed tax-free for qualified education expenses. The 529 can be transferred between family members or rolled into a Roth IRA after the education funding needs are met.  

Custodial accounts for grandchildren or children can also help move assets out of an estate, but contributions still count against the annual gift tax exclusion, and custodial account assets are factored into the FAFSA financial aid calculation.  

 Trusts are flexible education planning tools  

Rather than a custodial account, a trust allows the grantor (the person funding the trust) more control over how assets are used, and there’s no limit to the amount of assets you can contribute. Investment gains and distributions within the trust can still be taxable, however, unlike 529 plans.  

Irrevocable trusts can be used to fund tuition and to move money from an estate, but the funding still counts against the annual gift tax exclusion, and any contributions more than that amount count against the lifetime gift and estate tax exclusion.  

You can negotiate both financial aid and costs  

When dealing with large institutions, it’s easy to think the first offer is the last and there’s no ability to negotiate. Schools may be willing to lower their tuition by up to 15% for some students. You may also be able to ask one school to match or exceed another school’s greater financial aid package to allow your child to attend.  

Pay tuition directly to get assets out of your estate  

When it comes time to cut a check, make sure it’s written directly to the school. High-net-worth families have an opportunity to move taxable money out of an estate when paying education costs. So, while college costs can be steep, tuition provides a chance to transfer wealth tax-free to help pay for the education of younger generations of a family.  

Help is available  

The rules around college funding change all the time, and it can be difficult to know what funding strategy will work best in your family’s situation—but Opal Wealth Advisors are happy to offer their knowledge and experience to help you on your way. Contact us today to learn more.  



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