Paying for Education Expenses
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.