Author: Greg Lonczak, CFP®, is a Managing Director for Clearstead

As we hit the mid-point of August, many families are beginning to think of school for themselves, for their children, or their grandchildren. Some families may be experiencing the excitement and nerves of the first day of kindergarten and some may be preparing for their children to leave for college for the first (or perhaps last) time. While the start of a new school year will be both exciting and perhaps daunting, we wanted to highlight five financial ideas you can proactively review and consider over the last several weeks of summer, which will allow your family to be prepared for the year ahead:

1. Consider making direct tuition payments. The IRS allows you to pay for anyone’s educational expenses, regardless of level of education, without incurring federal income taxes, gift taxes, or using your annual exclusion limitations, so long as you pay the educational institution directly.

2. Make annual exclusion gifts. Now is as good a time as any to make use of your annual exclusion gifts. Individuals may gift up to $15,000 to each individual ($30,000 if married) without incurring a gift tax in 2019. For college age children or younger, we would recommend gifting be directed into 529 Plans, 2503(c) Trusts, or Crummey Trusts depending on the goals of the family.

3. Document scholarships. An overfunded 529 plan with assets remaining after college will require the payment of a 10% penalty on any remaining earnings, if withdrawn. However, there are some exceptions to the 10% penalty, including the beneficiary receiving a scholarship.

4. Review your liability insurance. Parents should consider their own liability for the child’s actions. Some common areas of focus include:

  •  Auto insurance: Will your college age child be taking your car to school? Will your child look to make extra money driving for Uber or Lyft?
  •  Homeowners Insurance: Is your child’s property covered under your policy while living in a dorm? Are you required to obtain separate renters and liability insurance if they reside in an off-campus apartment or house?

5. Consider having your child execute estate documents. In the eyes of the law, your child is legally an adult on their 18th birthday. Without having certain documents in place access to medical or financial records and the ability to make healthcare decisions may be limited. Planning for these issues and having the proper documentation executed is extremely important. If you have a child nearing or over 18, we encourage them to four key estate planning documents: healthcare power of attorney, durable (“financial”) power of attorney, HIPPA authorization, and a simple will. For FAQs on these documents, you can reference here the American Bar Association website on Estate Planning Info & FAQs.


At Clearstead, we create integrated, prudent, and custom strategies that bring clarity to you or your organization’s financial future.

Clearstead is an independent financial advisory firm serving wealthy families and leading institutions across the country. As a fiduciary, it provides wealth management services and investment consulting to help clients meet their financial objectives, achieve their aspirations, and build stronger futures.




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