In Pennsylvania, you can get a state tax credit for contributions to 529 plans. So one financial planner helped his client, an elderly widow, endow her nieces and nephews with a way to pay for college, plus get her a $180,000 estate tax savings.
Funding children's educations is not only a wonderful way to help out family members, but it can also earn you a state tax deduction.
"If you are a grandparent or an older relative, and you have the assets to pay for education, there's a three-way benefit," says David Zalles, a tax planner in Blue Bell.
The grandparent or older relative pays for college and (hopefully) witnesses the gratitude; the parents are relieved from some financial responsibility; and the children in school receive the benefit of closer family ties and a reduced burden of college debt.