Should Son or Dad Receive Gift Check for College Costs

By Rob Seltzer

My son's grandparents are sending us $10,000 to help pay his college tuition. We plan to put the money in a joint savings account in both our son's and his father's names. Should the grandparents write the check to our son or his father?

Short answer: It really doesn't matter who receives the $10,000 check since the amount is less than the annual gift exclusion amount. In 2008 that amount is $12,000 per recipient.

But you and the grandparents might consider having the check written directly to the college your son will attend. Here's why: A direct payment for tuition does not fall under the gift exclusion amount. So the grandparents can send your son up to $24,000 in 2008 in addition to making the direct tuition payment--if they so desire, of course.

Why $24,000? Because each grandparent can give up to $12,000 to any individual in 2008 and not have to report that amount to the Internal Revenue Service. And even if each grandparent gives more than $12,000 to your son and reports that additional amount, he or she likely will not pay any tax on it. That's because each giver may give a total of $1 million during his or her lifetime without paying any gift tax. (The giver pays the tax, not the recipient.) Furthermore, the annual exclusion amount is not included in the $1 million total. The $1 million total only includes the amounts exceeding the annual exclusion.

Going back to your original question, note also that each grandparent can give $12,000 to your son, $12,000 to your husband, and $12,000 to you and still not need to report anything to the IRS. In fact, they each can give up to $12,000 in 2008 to as many people they want and not have to report such gifts. Of course, this scenario is for illustrative purposes only!

Rob Seltzer is principal of Robert Seltzer, CPA, PFS, in Beverly Hills. Have a question for a CPA? Ask it here.

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