How to Help Fund Your Grandchildren’s College
By Deborah Jeanne Sergeant
You may not be able to cover your grandchildren’s entire college tuition; however, you can make it a little easier for them with a few strategies.
“Grandparents are in a unique position to have the ability to give substantial money to their loved ones,” said Neeraj Shah, certified public accountant and owner of Shah Law Firm, PLLC and Shah CPA Firm, PLLC in Penfield.
“Generally, grandparents are in a lower tax bracket than their working-age kids. Therefore, the more tax savvy approach is for the grandparent to ‘gift’ monies to the kids within the annual exclusion, so no tax reporting is required and then have the kids leverage the new money and contribute to their 529 education account.” Shah added. “This will result in the kids getting a state income tax deduction and tax-free growth on the money contributed to the 529 plan. A win-win-win.”
In 2026, a person can give up to $19,000 to any individual without incurring federal gift tax and couples can give $38,000 per recipient.
• Open a New York 529 Plan. With any dollar amount, you can open a tax-free plan that is designated for higher education. If your grandchild opts to skip college, the fund can be rolled into an IRA, transferred to any family member of any age or cashed out with a penalty.
“Funds grow tax-free and withdrawals for qualified education expenses are tax-free too,” Morgillo said. “A special rule called ‘super funding’ even allows a lump-sum contribution of up to five years’ worth of gifts at once, to allow more dollars to start compounding sooner.”
Consult with your financial adviser or tax preparer about how giving your grandchildren gifts will affect your tax return.
Another way to help your grandchild is to pay tuition directly to the university where your grandchild is enrolled. If you have estate tax liability, this could provide away to reduce it.
• Contribute to Trump Accounts. These federally managed, tax-deferred traditional IRA investment accounts for children may be used for education or other purposes. The accounts are seeded with $1,000 for children born between Jan. 1, 2025, and Dec. 31, 2028. Children older than that may have an account, but they will not receive the $1,000 in initial funding. The accounts grow until children are 18 and may be used for any purpose. Any child with a Social Security number is eligible. Families of children with these accounts may contribute up to $5,000 annually, not counting up to $2,500 from employers. They’re tax-deferred accounts until disbursement. Visit www.trumpaccounts.gov or file the IRS Form 4547 with your tax return. The accounts go live July 5, 2026. The IRS prioritizes adults eligible to open accounts in the order of: legal guardian, parent, adult sibling and grandparent.
• Find scholarships. Encourage college-bound students to apply for scholarships by helping them find opportunities and fill out forms.
• Help them get a car. As your grandchildren are able to get a part-time job, driving their own vehicle may help them access employment easier. If you have a reliable vehicle that you do not need, consider giving it to your grandchild. Or help them find a dependable used vehicle for a first car. If you’re unable to do that, perhaps you can help them with rides to and from work.
• Invest in their business. Budding entrepreneurs may need a boost to get their business going, such as a weed whacker for a lawn care business. Perhaps you can help them network with someone who could assist in generating more business.
• Offer advice. If your grandchildren could use some guidance, tactfully give them some solid tips on earning and saving. Use a kind and not a harsh tone to convey that you’re coming from a place of concern. For example, grandchildren who want to start a business would benefit from learning about overhead, pricing and customer service. If you know someone who performs similar work, you may be able to connect your grandchildren with a mentor.