March 24, 2017

WTOP Interview: Tuition Gifts With Tax Benefits

LISTEN NOW: If you want to fund your child or grandchild's education, don't miss these tax benefits.
Dawn Doebler, CPA, CFP®, CDFA®

Interview Transcript:

Hillary Howard: As a parent one of your most gratifying goals is to be able to provide a great education for your kids. For some, that means private schools, starting as early as kindergarten, for others it means having enough money to put away, and for some or most of your kids’ college.

Shawn Anderson: Joining us Dawn Doebler; cofounder of Her Wealth and Senior Wealth Advisor at Bridgewater Wealth in Bethesda. Great to have you back Dawn.

Dawn Doebler: Thanks for having me.

Shawn Anderson: If you want your child to have a private school education, what options are there with added tax benefits?

Dawn Doebler: We're advisors at her wealth, but we're also parents, so we're very passionate about coming up with best ways to save for education. If you’re talking about K-12, people should be considering a Coverdell ESA account, because that’s the only tax advantaged savings account that you can use for K-12 education. A couple of points on that, you want to start that account early because you’re limited to only $2000 per year contribution, so you need several years obviously to build up an amount that you can use there. Also, you want some time to accumulate earnings on that account because that’s where you get the tax benefit. And the earnings on contributions are tax free so long as you use the money for education. Couple of quick points if you have enough still available; after grade 12 you can use these funds for college and also interestingly you can use these funds for children with special needs and services that they are receiving.

Hillary Howard: So, let’s talk about grandparents, because some grandparents are fortunate enough to help out with their grandchild’s education, how can they do that?

Dawn Doebler: We have several clients whose grandparents are paying for their children’s private education and we think one the best ideas here are for grandparents to pay the tuition directly to the school, because if you write the check directly to the school, then it does not count towards your annual gift exclusion which is $14,000 per person. So, this amount is unlimited if you are writing the check directly to the school, and because it’s unlimited it’s a really great way to help people that may be in transition; someone who’s going through a divorce, their child is in private school, you can be helpful by paying tuition directly, it’s also a great way to reduce large estates because people can gift on top of the amounts that they are paying for tuition. So, we see it often used when grandparents are trying to reduce the size of their estates.

Shawn Anderson: Now you have an announcement today, launching something called Her Wealth Scholarship. Tell us here, what's going on?

Dawn Doebler: That’s right, very exciting for us at Her Wealth. As you know we're changing the conversation about women and their money, but we also want to change the financial industry. We want more women advisors talking to more women investors. So, the way we're supporting that is we're offering Her Wealth Scholarship that will help a young woman who’s going to be attending a regional college studying to become a certified financial planner, a CPA or a certified financial analyst. So, all of the details in the application is on our website; bridgewaterwealth.com/her-wealth.

Hillary Howard: Already beautiful. Thanks so much Dawn. Dawn Doebler with Bridgewater Wealth in Bethesda. Find out more about the scholarship and read more about @WTOP.com/search Her Wealth.

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Dawn Doebler, CPA, CFP®, CDFA®

Dawn’s experience spans more that 25 years providing wealth management, financial planning and corporate finance solutions for clients. As an MBA, CPA, Certified Financial Planner (CFP®), and a Certified Divorce Financial Analyst (CDFA®), she is uniquely qualified to understand the challenges and financial needs of clients from executives to entrepreneurs, as well as single breadwinner parents.