Question

Bianca is a wealthy widow and a doting grandmother. Bianca would like to do as much as possible to help her 18-year-old granddaughter Esmerelda with college expenses. Esmerelda will be attending a private college this fall and the tuition will be $24,000 per year. Esmerelda expects to graduate in 4 years. Room and board will cost an additional 11,000 per year. Which of the following will allow Bianca to provide the most financial assistance that is free from both gift tax and generation-skipping transfer tax?

Answers:      

A. Contribute $140,000 to a Section 529 plan and elect front-loading.

B. Gift $140,000 of highly appreciated stock directly to Esmerelda this year.

C. Contribute $70,000 to an ESA and elect front-loading.

D. Pay the $24,000 tuition directly to the school and write a check to Esmerelda for $11,000 each year.

Answer 1

A.Contribute $140,000 to a Section 529 plan and elect front-loading.

The purpose of 529 plan is to pay future educational costs .earlier 2017 tax bill 529 could be used only for college costs now they can use for education costs aswell .front loading the plan allows eaning to be compounded on more money over a long time period

529 savings plan is the best way to get the benefits as new changes has been made in 2018 it is more beneficial .

it has a limit of 70000 but it can give joint gift till 140000 and avoid federal gift tax provided u give evenly over five years

So it is better to go with 529 plan and elect front loading and get tax benftits and generation skiping trnsfer tax also