Niece needs money for college

[Milton]

Man, you folks are tough on the OP's niece.

Perhaps because of the fact that she sent an email request, rather than calling or at least sending a proper letter ... I know that struck me as discourteous. But we don't know the background, and perhaps her request is not quite as imperious as it seems.

If the op wants to help out her niece financially, that's her business; especially as she previously set aside the money for the very purpose. As she feels a moral obligation, issues such as whether the niece is making her own contribution, or could be studying somewhere cheaper, are essentially irrelevant.

My only suggestion is that the op tell the niece about the bonds and make it clear that cashing them in and providing her with the funds is a 'one shot' deal: i.e., she shouldn't expect any additional money down the road, because there isn't any. Just give her the money with no strings attached and no future expectations on either side.

P.S. "youse"??

 

[ERD50]

Because it is less than 12,000 you don't have to worry about direct payment, just give it to her.

Taxes could figure into this too, I think. IIRC, only the person actually paying the tuition can take the tax credit/deduction, ...hmmmm, maybe that is only for dependents (dependents as defined by tax laws, not FAFSA rules)?

-ERD50

 

[kyounge1956]

Kyounge, I think it's great that you're helping your niece. Remember no post here is not subject to our favorite hobby of giving unsolicited advice (I'm really good at that). Would you like me to tell you what she should major in?

You should tell her that. Unsolicited advice should always be directed at the person in the best position to flout it

 

[kyounge1956]

Perhaps because of the fact that she sent an email request, rather than calling or at least sending a proper letter ... I know that struck me as discourteous. But we don't know the background, and perhaps her request is not quite as imperious as it seems.

Niece is outside the country. Why would she spend desperately needed funds on a (very) long distance call when she could send email for free. The request was not imperious. If it sounded like that, my bad. She may also have tried to call me and gotten a busy signal because I was online.

If the op wants to help out her niece financially, that's her business; especially as she previously set aside the money for the very purpose. As she feels a moral obligation, issues such as whether the niece is making her own contribution, or could be studying somewhere cheaper, are essentially irrelevant.

I don't feel like I have a moral obligation. I feel like she's my niece and I would like to help.

My only suggestion is that the op tell the niece about the bonds and make it clear that cashing them in and providing her with the funds is a 'one shot' deal: i.e., she shouldn't expect any additional money down the road, because there isn't any. Just give her the money with no strings attached and no future expectations on either side.

As noted above I am thinking of enclosing the funds in a book of sound financial advice. The accompanying letter will definitely contain the advice to spend it wisely, because this is all there is.

P.S. "youse"??

I'm (originally) from Queens. You got a problem widdat?

 

[kyounge1956]

Taxes could figure into this too, I think. IIRC, only the person actually paying the tuition can take the tax credit/deduction, ...hmmmm, maybe that is only for dependents (dependents as defined by tax laws, not FAFSA rules)?

-ERD50

I don't think I can deduct anything. I know I don't claim her as a dependent on my taxes and that seems to be the starting point for many things. We aunts get the short end of the stick there. It sounds like I may as well bite the bullet and pay the taxes.

 

[youbet]

I don't think I can deduct anything. I know I don't claim her as a dependent on my taxes and that seems to be the starting point for many things. We aunts get the short end of the stick there. It sounds like I may as well bite the bullet and pay the taxes.

Speaking as a "not a tax expert," I can't think of any situation where you can help with your niece's college expenses and have it be a tax advantage for yourself. However, do a little research and see if either gifting the money directly to your neice or to her parents might allow some tax advantage to any of them when she or they pay the college bill.

I'm taking a three step approach to helping my 3 grandkids with college.

1. I contribute the max $2k/yr each to their Coverdale Educational IRA's. Their dad, my son, owns the accounts so technically I'm gifting the money to him and he's making the contributions. In actuality, I do it all with linked accounts at Schwab. Those accounts work somewhat like a Roth IRA. No deduction, but withdrawals for educational expenses (both principal and earnings) are tax free.

2. I'll gift them up to $12k/yr (current gift tax exclusion) as necessary while they actually are in school.

3. Needs beyond $12k/yr will be made directly to the school to avoid triggering any gift tax.

Of course, this all assumes DW and I are able to plod along through retirement as we have been with no/few more additional recessions or other setbacks driving our retirement portfolio to be a FireCalc failure! Only time will tell.

BTW, we grandparents don't get any tax breaks for grandkids that you aunts don't get for nieces and nephews........

Edit: Looking back at my post, a little clarifying is in order. The Coverdale IRA's (probably will be $40k - $50k in today's dollars) will be there for each grandkid when, and if, they start post secondary school. Additional funds are not a commitiment made to them apriori, but rather a commitment made to my son, their father, that I'd pay for the kid's college if required. Hey, if they get schlorships, need based aid or participate in co-op or work-study programs and don't need Papa's dough, no problem with me! This has allowed DS and DIL to focus on retirement funding and on the expenses of having a special needs child without feeling they'll never be able to help with the kids college if required. It's kind of a team thing.......

 

[Orchidflower]

Don't have time to read all the posts, but I made my own son pay 100% for his college. He acts like he did something spectacular, but I did it, my half-brother did it, my stepfather did it, so I don't think it's anything that unusual. Regardless, I made him pay for it because I knew FOR SURE that he would do very well then. And he did: made honors in several disciplines!
I have to go along with everyone else saying skin in the game is important. However, that doesn't mean you can't buy books or something to assist if you want to; but I'm personally against the "free ride" unless the kid gets a scholarship, which is even better.
...but let me say that I would have just loved to have a relative like you when I was in college. I'm available for adoption if you're interested....

 

[youbet]

I made my own son pay 100% for his college. He acts like he did something spectacular, but I did it, my half-brother did it, my stepfather did it, so I don't think it's anything that unusual.when I was in college.

And both DW and I did it too. I was relatively lucky in that I had the appropriate FCC license and was able to be an engineer/announcer at a small radio station near school and made union wages working full time, or near full time, hours. DW had to work for the catering service that ran the cafeterias on campus and spent 4 years doing really, really, really crappy jobs for very long hours. Despite having great academic success (graduated 5th in her class with honors), 40 yrs post graduation, she still frowns when asked about her college years and has never been back to campus.

In hindsight, while we both made it though, we missed a lot of campus life by having zero time for school activities, sports events, off campus studies or anything really.

When our son went, we decided that we'd kick in so that he could experience more campus life. He co-op'd in the Mech Eng program and that easily covered his books and personal money. We paid the room, board and tuition. He did well and actually had time to attend an occasional sports event, dance, party or whatever.

There's some middle ground there. You don't have to pay 100% of your college expenses to have "buy-in." There's some room for flexibility.

 

[WhoDaresWins]

Kyounge1956---I am really impressed by your "pay it forward" attitude in wanting to make your niece's life a little easier by contributing to her education in recognition of the fact that you, too, were the beneficiary of some help. Hopefully you will imprint her by your example, and she will make it a family legacy to assist others as she is able throughout her life. I like the idea of helping someone I care about when they need it. Lord knows, many people have helped me in this life(not necessarily speaking monetarily here), and I remain very grateful to them. I can never repay my parents as they passed away a long time ago, but I try to live by their example which sets the bar for me very high indeed.

 

[freebird5825]

This post is not meant to influence the OP on what to do/not do for the niece. That is entirely his/her business. But these self-made stories may provide a different insight into what it really means to have "skin in".

Ditto on the self-help program, except NYS awarded me (how sweet ) a full 4 year merit scholarship to any state school. The miscellaneous fees and some of room/board came from federal aid for needy students (BEOG, SEOG, NDSL, College W*rkStudy). What a deal that was!
Everything else was up to me. Mom helped a little with a $25 check here and there, but she was barely making ends meet herself.
I know there are many of us here that have the same type of story to tell. And look at us now. We are FIREd.

I rest my case, Your Honor.

 

[kyounge1956]

Speaking as a "not a tax expert," I can't think of any situation where you can help with your niece's college expenses and have it be a tax advantage for yourself. (snip) BTW, we grandparents don't get any tax breaks for grandkids that you aunts don't get for nieces and nephews........

too true. However, that prevents the said nieces, nephews or grandkids from thinking we're just giving them money to get the tax deduction.

Edit: Looking back at my post, a little clarifying is in order. The Coverdale IRA's (probably will be $40k - $50k in today's dollars) will be there for each grandkid when, and if, they start post secondary school. Additional funds are not a commitiment made to them apriori, but rather a commitment made to my son, their father, that I'd pay for the kid's college if required. Hey, if they get schlorships, need based aid or participate in co-op or work-studty programs and don't need Papa's dough, no problem with me! This has allowed DS and DIL to focus on retirement funding and on the expenses of having a special needs child without feeling they'll never be able to help with the kids college if required. It's kind of a team thing.......

I don't know about Coverdale accounts. What happens to the money in a Coverdale if it isn't used for educational expenses? Can DS & DIL access it for retirement or for costs associated with special needs? Or if one of the grandkids turns out to be an entrepreneur, can the money be used to buy or start a business?

 

[youbet]

I don't know about Coverdale accounts. What happens to the money in a Coverdale if it isn't used for educational expenses? Can DS & DIL access it for retirement or for costs associated with special needs? Or if one of the grandkids turns out to be an entrepreneur, can the money be used to buy or start a business?

I won't try to give a complete explanation of Coverdale IRA's, you can Google that up easily enough, but my understanding is that if a child does not use the money by a certain age (late 20's, can't remember the exact age) those dollars can be redirected to another child or withdrawn but taxed as ordinary income. The definintion of educational expenses is broader than for 529B plans in that elementary school, high school, traditional college, vocational school, all count. You can also apply the funds to supplies including computers, etc.

Special needs education - yes

Parent's retirement - no

entrepreneural activities - no

 

[Nords]

Hasn't the gifting limit been raised to $13K yet? Oh, that's right, there's no inflation this year. Or at least not in the expenses that go into the CPI calculation.

I have two nieces who have graduated and another one besides this one in college, and this is the first time any of them have asked me to help with college expenses, so the rest of youse can stop making those remarks that sound as if you think niece is a leech and her parents are deadbeats. Neither the nieces nor their parents make a habit of asking for handouts.

We've been down this thread a few times before.

With varying degrees of tact and good intentions, posters are concerned about "affluenza" and "a sense of entitlement". Your clarifications make the situation much less scary than it originally seemed.

I think the posters also tend to be split along the lines of who worked their way through college (and benefited thereby) vs those who were paid to go to school (and benefited thereby). Gotta know your [-]kids[/-] beneficiary.

If I had gone to a civilian school instead of USNA I'm pretty sure that I wouldn't have made it to sophomore year. And while we're probably able to afford our kid's college expenses, her NROTC decision puts her motivation right where it should be.

 

[kyounge1956]

One more question: some of the bonds are so recent that there would be a penalty if I cashed them, but other than avoiding those, does it make any difference which ones I cash first?

 

[Milton]

It's up to youse.

 

[kaneohe]

I suspect this won't work but perhaps it might be worth a try anyways to find out how well the computers are programmed. Suppose OP adds niece as co-owner. I think, based on this Individual - Series EE/E Savings Bonds Tax Considerations
that this is not a taxable event. Later niece cashes bond at bank. In principle, principal co-owner (OP) is responsible for interest but I wonder what computer will do since niece is cashing it.......does she give her SSN and does computer get confused by that or not? The worst that will happen is that 1099 goes to OP but perhaps it might go to niece.

 

[Martha]

Good find kaneohe. Reading the link I wondered if the niece could be listed as "principal co-owner" as that is the person responsible for tax reporting. But the definition of principal co-owner is:

Principal Co-owner

The principal co-owner is the co-owner whose funds were used to purchase the savings bonds or who received the bonds as a gift, as an inheritance, or through court proceedings and had the bonds reissued to add another person as co-owner without receiving any contribution from that other person.

Individual - Glossary of Terms

So it looks doubtful to me that this strategy will work.

 

[Milton]

I wondered if the niece could be listed as "principal co-owner" as that is the person responsible for tax reporting.

I have the impression that the principal amount is relatively modest and the taxes will be accordingly limited; if so, I would suggest just paying the tax and gifting the balance to the niece. It doesn't make much sense to get 'cute' in the hope of evading a small amount of tax.

If I am wrong and the amounts at stake are actually substantial, I recommend seeking professional guidance rather than relying upon free advice on this forum.

 

[Martha]

Milton, you took my post out of context. I specifically doubted that the strategy would work. I feel like what I said was misrepresented.

Regarding your statement about free advice, our rules say don't rely on what people say here. To reinforce this, I and others often refer to their disclaimer signature lines. In this thread alone I referred to mine twice.

<sigh>

 

[Bimmerbill]

She can't join the National Guard? They paid for some of my B.S. and 80% of my MBA. The new GI Bill is pretty nice.

 

[Milton]

I specifically doubted that the strategy would work.

Yes you did.

I feel like what I said was misrepresented.

I am sorry for the hurt feelings. I didn't intend to misrepresent anything, and your post speaks for itself.

My post was intended to assist the op, rather than attack you (or anyone else who is trying to help). In hindsight, I should not have quoted part of your post (intended only to give my post some context, but not really necessary in the circumstances).

<sigh>