How Grandparents Can Help Pay For College

Grandparents wanting to help pay for a grandchild's education may with to consider a 529 Plan.
Grandparents wanting to help pay for a grandchild’s education may with to consider a 529 Plan.

If you are a grandparent wondering how you can help pay for a grandchild’s future college education, you may wish to consider a Qualified Tuition Plan under IRC Section 529, otherwise known as a 529 plan.

Forbes’ recent article entitled “Estate Planning Primer: Qualified Tuition Plans” explains that there are two kinds of 529 programs that can help pay for college (and some other education expenses): prepaid plans and savings plans. The earnings on the assets in the 529 plan aren’t taxed, until the funds are distributed. The distributions are also tax-free up to the amount of the student’s “qualified higher education expenses.”

One kind of 529 plan is known as a prepaid plan. With this plan you buy tuition credits at the current tuition rates, even though your grandchild may not be starting college for several years. Because the cost of a college education rises every year, there is a substantial benefit to being able to lock in the cost at today’s rate.

The other kind of 529 plan is a savings plan. Even though the earnings in the plan are tax deferred and, to the extent used for qualified higher education expenses, tax-free, the amount available to pay the college costs depends on the investment performance of the plan. The more the funds in the plan grow, the more education costs can be covered. But if the value of the plan declines, fewer education costs will be covered.

Qualified higher education expenses include tuition, fees, books, supplies, and required equipment. Reasonable room and board may be considered a qualified expense, if the student is enrolled at least half-time. Distributions of income from the 529 plan in excess of qualified expenses are taxed to the student, and may result in 10% penalty.

You would designate you grandchild as beneficiary of the 529 plan at the time you create it. However, you are able to change the beneficiary or roll over the funds in the plan to another plan for the same or a different beneficiary.

A 529 plan may be used to fund a grandchild’s education at any college, university, vocational school, or other post-secondary school eligible to participate in a student aid program of the Department of Education.

Any funds you contribute to the 529 plan will be treated as gifts to your grandchild; however they qualify for the annual gift tax exclusion ($15,000 per person per year for 2020) adjusted annually for inflation. If you contribute more than the annual exclusion amount in a given year, you can elect to have the gift treated as being made over a five-year period starting with the year of the contribution.

While you may name yourself as custodian of the 529 plan, it is important to also designate a successor custodian, perhaps a parent of a grandchild, in the event you are not able to act as custodian.

Reference: Forbes (Aug. 5, 2020) “Estate Planning Primer: Qualified Tuition Plans”

Continue ReadingHow Grandparents Can Help Pay For College

Estate Planning and National Disaster Preparedness Month

National Disaster Preparedness Month reminds us to make sure our estate planning is up to date.
National Disaster Preparedness Month reminds us to make sure our estate planning is up to date.

The unpredictable can occur at any time: fires, hurricanes, floods, earthquakes, pandemics—you name it. Because September is National Disaster Preparedness Month, we want you to be prepared for whatever life throws at you. Although none of us can predict the future, there are some things you can do through proper estate planning to ensure that you and your family are ready. Here are a few questions to consider to help protect the people and possessions you value most.

 

  • Are your documents secure? When trouble occurs, your documents must be ready. It is therefore critical that your important legal documents be kept secure in a weatherproof safe or container. Likewise, documents regarding property ownership and identity should be stored away from exposure to dangerous elements such as fire, floods, and wind. When the dust settles, you will need your important paperwork and legal documents to help get you through difficult times.
  • Are your documents up to date? Consider whether your estate planning documents reflect your reality. One unfortunate but common mistake is the failure to keep important documents current. People often forget to periodically review and update their documents after receiving them. As a result, outdated estate planning documents frequently cause confusion because they describe a situation that is no longer applicable.
  • Do people know where to find your documents? As you try to prepare for the unpredictable, making your important documents accessible is crucial. Having plans in place are of little value if no one can find them. There are a number of ways you can provide accessibility without significantly impacting security. A simple option is to keep the original documents in your home in a location you have disclosed to another family member, and keep a copy of the documents at a location other than your home in case your home is inaccessible. You can also utilize technology to help provide accessibility by having digital copies available to you regardless of where you may be.
  • Is your insurance adequate and current? Insurance is a tool that must be monitored and maintained as your family and wealth change. In preparing for the unexpected, review your insurance policy to make sure it adequately covers you, your family, and your possessions in the event of a crisis. If you have previously witnessed natural disasters or emergencies, these experiences can provide valuable insight to help you ensure that your policies will protect you against the recurrence of these events. For example, because many of us who live in Texas have been negatively impacted by recent hurricanes and flooding, now may be the time to better understand, update, or upgrade their flood insurance.
  • Should you have a rider on your existing insurance policy? You may not be familiar with insurance riders, but incorporating riders allows you to customize and maximize your protection. Insurance riders provide additional flexibility and features to your current insurance policy with options that provide various levels of value depending upon your lifestyle and needs. For example, many policies offer a “waiver of premium” rider that creates a mechanism for continued payment of insurance premiums in the event you become disabled and are no longer able to make the payments. This means that your insurance coverage will not lapse due to your disability. Exploring the available rider options can ensure that you have customized a plan into something that works for you and your unique situation.

Disasters and emergencies are inevitable. National Disaster Preparedness Month reminds us that we can plan for any number of potential events, but we cannot always predict when or how they will impact us. By proactively asking yourself these questions, you will be better positioned to remain calm and focused in the midst of a crisis.

Learn more about updating your estate plan at https://galligan-law.com/when-to-update-your-estate-plan/.

Continue ReadingEstate Planning and National Disaster Preparedness Month

An Often Misdiagnosed Dementia

Lewey body dementia is an often misdiagnosed dementia.
Lewey body dementia is an often misdiagnosed dementia.

Many people had never heard of Lewy body dementia until it was reported in 2014 that this was the disease that afflicted Robin Williams. While Lewy body dementia and Alzheimer’s disease are the two most common types of dementia, those who have Lewy body dementia are often misdiagnosed as having Alzheimer’s disease or depression. As a result, they do not get the treatment and support they need.

Considerable’s recent article entitled “The second most common type of dementia often goes unrecognized” reports that in one study, nearly 70% of people diagnosed with Lewy body dementia visited three consultants before receiving the diagnosis. For 33% of people with the disease, the dementia was misdiagnosed and getting the correct diagnosis took over two years.

There are two different conditions associated with Lewy body dementia: dementia with Lewy bodies and Parkinson’s disease dementia. In dementia with Lewy bodies, problems with memory and thinking occur simultaneously with problems involving movement, like those associated with Parkinson’s disease. In Parkinson’s disease dementia, a person who has had movement problems resembling Parkinson’s disease for several years, then develops difficulties with memory and thinking.

In addition to memory, thinking, and movement problems, symptoms of Lewy body dementia include issues with alertness and concentration, hallucinations and paranoia, acting out dreams during sleep, low blood pressure when standing, daytime sleepiness and depression.

Because the symptoms of Lewy body dementia often resemble other conditions, research reveals that the first diagnosis is commonly incorrect. For example, in one study 26% of people who had Lewy body dementia were misdiagnosed as having Alzheimer’s disease, and 24% were determined to have a psychiatric diagnosis like depression.

We saw this first hand at our firm when a family member was suffering with this kind of dementia. It went undiagnosed until it was too late to treat it properly. We feel it’s important to get the word out to family members who might think their loved one is suffering from depression, Parkinson’s disease, or another kind of dementia.

Failure to properly diagnose a person with Lewy body dementia can result in delay in treatment specifically targeted for that condition. Also, with the correct diagnosis, patients and families can seek out resources, such as the Lewy Body Dementia Association, an organization dedicated to helping people living with this disease. This group provides education on Lewy body dementia, helps patients and families know what to expect, connects patients and families to support and resources and helps them find research opportunities.

For more information on dementia issues see https://galligan-law.com/some-common-drugs-may-increase-risk-of-dementia/

Reference: Considerable (Aug. 14, 2020) “The second most common type of dementia often goes unrecognized”

Continue ReadingAn Often Misdiagnosed Dementia