Paying for college

[feetsdr]

My dad wants to pay my son's college bill to help lower his estate. Paying the school directly would allow him to lower his estate and not be considered a gift, right?

But only for tuition? room, board and loads of other fees don't count?

Can he just make a lump sum now for several years tuition 'on account'. Would he have to / want to say 'this is for tuition only for the next 3 years' and I would still have to pay the other expenses even though the account would be running a credit?

does the 'gifting in anticipation of death' rule come into play on this? or just gifts to people? and is that 3 years retro or longer?

thanks!

 

[anteater]

I'll only go so far here since there are some of your questions upon which I am hazy.

I think the first question would be:

Does your father have an estate large enough that "estate reduction" is even a concern? A lot of folks think that they have a potential "estate tax problem" when they really don't. And, honestly, if they really do have a potential problem, they really can afford an estate planning or tax professional to work through these things.

Yes, direct payment of tuition falls outside the whole gift tax thing. And I am pretty certain that it only applies to tuition. I am not really certain about the prepayment question. My inclination is to say that it would not be allowed, but I will leave that to some of the tax professionals here who, I hope, will chime in.

Since the direct payment of tuition falls outside the gift tax rules, one suggestion to look at might be direct tuition payment + creation of a 529 for other higher ed expenses.