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Granparents may cover preschool tuition, skip gift tax

If you're like many grandparents, you are always on the lookout for creative ways you can spread around your good fortune and resources to the ones you love, especially your grandchildren. While it is well-established that you can avoid a great deal of taxation by putting money aside for your grandchildren's higher education, but you may also be able to put resources toward preschool and doge the gift tax with a little careful planning.

It's no secret that preschools are becoming big business, with high-end options carrying price tags that rival many college's tuitions. Provided that your grandchild attends a preschool that the RIS considers and educational organization, you may be able to qualify paying the tuition directly to the school as a non-taxable gift.

Of course, the details must all be in order. The preschool must not be a simple drop-off day care, but must be an actual school with a regular faculty and an enrolled student body. It may difficult to determine whether or not your grandchild's preschool will qualify as an educational establishment rather than merely custodial care, but doing this homework can pay off significantly. Once you find a preschool that meets the legal requirements of an educational establishment, you may pay for the tuition directly without eating into your yearly non-taxable gift allowance or your lifetime gift tax exemption.

If you want to learn more ways that you can use the law in your favor to share your resources with the ones you love, do not hesitate to enlist the help of an experienced estate planning attorney. Proper legal guidance can help you build the perfect plan for you and the ones you love, while keeping your rights protected.

Source:, "Grandma to the rescue: The tax-smart way to cover preschool," Darla Mercado, March 23, 2017

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