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ARTICLE · 23 NOVEMBER 2006

Paying For Education Expenses

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Education expenses have soared over the past several years. According to collegeboard.com, the 2005–2006 average cost of tuition and fees at a private U.S. college was $21,235, up 5.9% from the previous year. The rising costs of education have led many to seek ways to help family and friends meet these obligations with minimal adverse tax consequences.

United StatesTax

By Karen Clute and Michael Clear

Education expenses have soared over the past several years. According to collegeboard.com, the 2005–2006 average cost of tuition and fees at a private U.S. college was $21,235, up 5.9% from the previous year. The rising costs of education have led many to seek ways to help family and friends meet these obligations with minimal adverse tax consequences. A variety of options exist to pay another’s education expenses, including direct gifts, tax-advantaged education savings plans and health and education exclusion trusts. But, regardless of which option you choose, careful attention should be paid to potential gift tax and generation-skipping transfer tax (GST tax) issues which may arise. Additional information on the federal and Connecticut gift tax and GST tax can be found at the end of this article.

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