There is an old saying that goes something like “Give a man a fish, he eats for a day; teach a man to fish, he eats for a lifetime.” (Okay, they were sexist in those days, but you get the idea.) When you are engaged in inheritance planning this message is highly relevant. On the one hand planning your estate is all about “giving a person a fish.” On the other hand, when you give the people that you love things that they didn’t have to work for they may never learn now to take care of themselves.
Many people who are interested in estate planning are looking for ways to reduce the taxable value of their estates. Tax-free gift giving is a way to do this, and as we have stated here previously there are exemptions that make this possible. There is the $1 million lifetime gift tax exclusion, but since it is unified with the estate tax exclusion using it is of little value. But there is the $13,000 per person annual gift tax exemption, and there is also an educational gift exemption. You can pay the tuition of as many students as you want to as a gift, equaling any amount of money, totally free of the gift tax. This gift must be made directly to the school and not the student.
So as you can see it would be possible to provide an education for your loved ones before you pass away and “teach them to fish.” It should be noted that the educational gift exemption does not extend to books, fees, and expenses. But you could use your $13,000 per person annual exemption to cover those in part, and if you are married your spouse could do the same. People talk about “family dynasties,” and they come in multiple forms. Providing an open pathway to unlimited higher education for your family and perhaps your extended family is certainly an honorable way to spread the wealth.