Suddenly have to pay for kids’ colleges

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DolfanAtx
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Suddenly have to pay for kids’ colleges

Post by DolfanAtx »

Long story short, my kids’ grandpa was going to pay for their college and as my oldest is entering his senior year in high school, grandpa said he’s not paying. Said he’s changed his mind for all 7 grandkids and mine are the oldest so it impacts me now.

Kids are incoming 12th grade. 9th, and 6th.

Good news is that I just sold my business so I have the cash to fund them but have never set up a 529 (I’m in Texas).

Confused about where to start. Is it as simple as calculating how much I think all 3 kids will need and then fund a 529 fully, or contribute annually over the next several years?

What if Grandpa changes his mind in the last moment? Is this just a 10% fee to reallocate?

Any resources would be greatly appreciated.

Thanks in advance.
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grabiner
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Re: Suddenly have to pay for kids’ colleges

Post by grabiner »

Welcome to the forum!

Since you live in Texas, there is no state tax consideration, and no particular reason to use the Texas 529 plan. Choose a state plan that has low-cost options consistent with your investment goals.

The reason to fund a 529 is to get tax-free growth on the investment gains. If you invest in an ordinary stock or bond fund in a brokerage account, you will pay tax on all the gains (or, if you use a municipal-bond fund, accept lower yields for the tax exemption). If the money is not used for college, it can be left there (in case the child goes to graduate or profession school), transferred to the 529 for another family member, or withdrawn with tax and a 10% penalty on only the gains. If the reason that the money is not used for college is that the child gets a scholarship, there is no 10% penalty, only tax due on gains withdrawn for other purposes.

If you don't have confidence in Grandpa's gift, and you have all the money, you can fund everything at once, to get the tax-deferred growth as soon as possible.
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Re: Suddenly have to pay for kids’ colleges

Post by Trader Joe »

DolfanAtx wrote: Sun Jul 25, 2021 5:01 pm Long story short, my kids’ grandpa was going to pay for their college and as my oldest is entering his senior year in high school, grandpa said he’s not paying. Said he’s changed his mind for all 7 grandkids and mine are the oldest so it impacts me now.

Kids are incoming 12th grade. 9th, and 6th.

Good news is that I just sold my business so I have the cash to fund them but have never set up a 529 (I’m in Texas).

Confused about where to start. Is it as simple as calculating how much I think all 3 kids will need and then fund a 529 fully, or contribute annually over the next several years?

What if Grandpa changes his mind in the last moment? Is this just a 10% fee to reallocate?

Any resources would be greatly appreciated.

Thanks in advance.
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123
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Re: Suddenly have to pay for kids’ colleges

Post by 123 »

DolfanAtx wrote: Sun Jul 25, 2021 5:01 pm ...Said he’s changed his mind for all 7 grandkids and mine are the oldest so it impacts me now...
Possibly he did not expect to become richly blessed with so many grandchildren.
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gubernaculum
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Re: Suddenly have to pay for kids’ colleges

Post by gubernaculum »

I paid all of my childrens colleges ( a total of three). I am happy they dont have any debt, but investing wise it hurt me. Overall happy that I was able to do that for them.
BogleHead1008
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Re: Suddenly have to pay for kids’ colleges

Post by BogleHead1008 »

There is a joy in funding your own kids education and see them flourish. Hopefully grandpa will come around and pay for some at least.


Only thing I tell my kids, they are to do well in education and I will pay for their education, provided they are not shooting for ivy leagues without full funding.

I have 529 from AZ and my kids are 15 and 13 and I need to ramp up contribution's.
HopeToGolf
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Re: Suddenly have to pay for kids’ colleges

Post by HopeToGolf »

See the various threads on the topic.

I think you should skip the 529 since you do not have enough time to meaningfully benefit from the tax advantages since you should have a conservative portfolio with the kids so close to college age.

It’s over. You made a bet on someone else funding tuition and it didn’t work out. No big deal. Fund tuition out of savings or cash flow.

Trying to use the 529 is adding complexity and if you ran the math using traditional thinking, your returns/financial outcomes would be suboptimal.
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Re: Suddenly have to pay for kids’ colleges

Post by cchrissyy »

welcome! and sorry!
there is almost no point in opening a 529. you can simply pay for this out of your income or your other accounts.
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Notsobad
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Re: Suddenly have to pay for kids’ colleges

Post by Notsobad »

It is reasonable to open one for the youngest, as there are 7-11 years of growth that might benefit from being in a 529
miamivice
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Re: Suddenly have to pay for kids’ colleges

Post by miamivice »

Just to clarify, the 529 penalty on non-qualified withdrawals applies to earnings only and not principal. So there really isn't a downside to opening a 529 for the 12th grader. It won't help much but it also won't hurt if Grandpa comes through in the end.
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Re: Suddenly have to pay for kids’ colleges

Post by invest4 »

123 wrote: Sun Jul 25, 2021 8:53 pm
DolfanAtx wrote: Sun Jul 25, 2021 5:01 pm ...Said he’s changed his mind for all 7 grandkids and mine are the oldest so it impacts me now...
Possibly he did not expect to become richly blessed with so many grandchildren.
Heh. Indeed. A bit unfortunate that Grandpa has done a full 180, but glad OP is well positioned to handle. A fair warning to others who may also be counting on funding from well meaning people who may ultimately be unable or unwilling to do so.
Last edited by invest4 on Sun Jul 25, 2021 10:33 pm, edited 1 time in total.
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HomerJ
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Re: Suddenly have to pay for kids’ colleges

Post by HomerJ »

Don't bother opening a 529 for the oldest.

It's for tax-free growth, and he's going to college in a year so don't bother. Just pay for it out of your checking account (luckily much larger since you sold your business)

What's your income going to be going forward? Are you retired?
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Re: Suddenly have to pay for kids’ colleges

Post by stimulacra »

Never count on verbal promises. If he was serious, you should have set up a 529 account and have him contribute to it. That way you have a measure of certainty in the matter… now you are scrambling a bit.

I live in Texas as well, there's no in-state tax advantage to setting one up. Not too late to do so… I would recommend Vanguard if you decide to do so.
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Re: Suddenly have to pay for kids’ colleges

Post by RyeBourbon »

invest4 wrote: Sun Jul 25, 2021 9:55 pm

Heh. Indeed. A bit unfortunate that Grandpa has done a complete 360
So he's come all the way around to paying for college?
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Re: Suddenly have to pay for kids’ colleges

Post by rob »

stimulacra wrote: Sun Jul 25, 2021 10:01 pm Never count on verbal promises. If he was serious, you should have set up a 529 account and have him contribute to it. That way you have a measure of certainty in the matter… now you are scrambling a bit.
It would not matter since the grandparent would still control (unless gifted to parent or child). Not counting chickens comes to mind...

Agree above, no point for 529 for oldest but there is for 6th grader. 9th grader - I would probably not bother given you don't get a tax break. I underfunded 529 plans in case the kids don't go to college and planned some taxable savings and cover the rest with income/savings.
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Da5id
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Re: Suddenly have to pay for kids’ colleges

Post by Da5id »

invest4 wrote: Sun Jul 25, 2021 9:55 pm
123 wrote: Sun Jul 25, 2021 8:53 pm
DolfanAtx wrote: Sun Jul 25, 2021 5:01 pm ...Said he’s changed his mind for all 7 grandkids and mine are the oldest so it impacts me now...
Possibly he did not expect to become richly blessed with so many grandchildren.
Heh. Indeed. A bit unfortunate that Grandpa has done a complete 360, but glad OP is well positioned to handle. A fair warning to others who may also be counting on funding from well meaning people who may ultimately be unable or unwilling to do so.
Yeah, counting on it is probably unwise. Still for grandparent to go from fully paying for college to paying 0 when the oldest kid is 18 is really kinda harsh/unpleasant. My parents volunteered to pay for my kids college, had they backed out at the last minute would have been awkward though I could have managed.
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Re: Suddenly have to pay for kids’ colleges

Post by stimulacra »

rob wrote: Sun Jul 25, 2021 10:10 pm
stimulacra wrote: Sun Jul 25, 2021 10:01 pm Never count on verbal promises. If he was serious, you should have set up a 529 account and have him contribute to it. That way you have a measure of certainty in the matter… now you are scrambling a bit.
It would not matter since the grandparent would still control (unless gifted to parent or child). Not counting chickens comes to mind...

Agree above, no point for 529 for oldest but there is for 6th grader. 9th grader - I would probably not bother given you don't get a tax break. I underfunded 529 plans in case the kids don't go to college and planned some taxable savings and cover the rest with income/savings.
Yes, it would be a 529 account that you control, that they can contribute to only, most plans make this super easy. I'm pretty transparent with the asset allocation, target date and whatever else they might need to know from a stewardship perspective.

Also… don't give out your kids SSN to family members to set up their own 529 on their behalf.
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Re: Suddenly have to pay for kids’ colleges

Post by babystep »

grabiner wrote: Sun Jul 25, 2021 7:58 pm Welcome to the forum!

Since you live in Texas, there is no state tax consideration, and no particular reason to use the Texas 529 plan. Choose a state plan that has low-cost options consistent with your investment goals.

The reason to fund a 529 is to get tax-free growth on the investment gains. If you invest in an ordinary stock or bond fund in a brokerage account, you will pay tax on all the gains (or, if you use a municipal-bond fund, accept lower yields for the tax exemption). If the money is not used for college, it can be left there (in case the child goes to graduate or profession school), transferred to the 529 for another family member, or withdrawn with tax and a 10% penalty on only the gains. If the reason that the money is not used for college is that the child gets a scholarship, there is no 10% penalty, only tax due on gains withdrawn for other purposes.

If you don't have confidence in Grandpa's gift, and you have all the money, you can fund everything at once, to get the tax-deferred growth as soon as possible.
This. I had to read it multiple times for the wealth of information.

With respect to investment options, you can look at these age based 529 plans as an example. They are diversified and automatically adjusts to a more conservative allocation as kid gets closer to the college.
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Re: Suddenly have to pay for kids’ colleges

Post by MathWizard »

Don't depend on any promises of inheritance .

Grandpa may not be as well off as he thought.
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Re: Suddenly have to pay for kids’ colleges

Post by WAROB »

Let the kids know they will receive a great education from a state school and benefit in the long run from working through school to cover living and social expenses.
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Re: Suddenly have to pay for kids’ colleges

Post by cadreamer2015 »

I agree that there is little point in setting up a 529 plan for your 12th grader, but it might make sense for your 6th grader who has at least 10 years before college expenses are finished.
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makingmistakes
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Re: Suddenly have to pay for kids’ colleges

Post by makingmistakes »

Krishmk wrote: Sun Jul 25, 2021 9:15 pm There is a joy in funding your own kids education and see them flourish. Hopefully grandpa will come around and pay for some at least.


Only thing I tell my kids, they are to do well in education and I will pay for their education, provided they are not shooting for ivy leagues without full funding.
Ivies only give financial aid based on need … not based on academics or athletics.
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Re: Suddenly have to pay for kids’ colleges

Post by Ed 2 »

1. Kids since day one are your responsibility.

2. Never rely on your relatives, even your parents.

3. Go to savingsforcollege.com , reed the tutorials and choose best 529 account for your state. You’ve got money.
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Re: Suddenly have to pay for kids’ colleges

Post by anon_investor »

cadreamer2015 wrote: Mon Jul 26, 2021 4:58 am I agree that there is little point in setting up a 529 plan for your 12th grader, but it might make sense for your 6th grader who has at least 10 years before college expenses are finished.
+1.
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markjk
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Re: Suddenly have to pay for kids’ colleges

Post by markjk »

DolfanAtx wrote: Sun Jul 25, 2021 5:01 pm Confused about where to start. Is it as simple as calculating how much I think all 3 kids will need and then fund a 529 fully, or contribute annually over the next several years?
Thanks in advance.
The 529 still seems reasonable, even for the oldest. Like retirement, you don't pull all of your money out on day one. For your oldest, assuming it's a four year program, you have 4 - 5 years to earn something tax free off portions of the money. The question you need to answer is do you think the limitations of a 529 account are worth that tax free earnings at this point or should you just go with another approach (savings, brokerage, etc.)?

I think a mixed approach is worth considering. You don't want too much in the 529 but it certainly seems like you can take advantage of it to fund portions of your kids' education.
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Re: Suddenly have to pay for kids’ colleges

Post by RickBoglehead »

I think it's reasonable for a couple to depend on the grandparent(s)' commitment to do something, if they take steps to ensure that it's a commitment, and not just talk, or not truly thought out. For 7 grandkids, Grandpa would have to be pretty loaded.

When our son got married, we had a talk with him and his wife about college funding. We became instant grandparents with a step-granddaughter that was 7 years away from college. We told them that we were committing to fund a specific dollar amount for each grandchild, including the step-granddaughter, and then took steps to prove it. We split off some 529 funds into an account where my son is the beneficiary (not the grandchild), and gave him the ability to have online access (and visibility) to see (but not touch) the balance. Therefore, he sees the committment.

When their first child was born, we matched the existing funds (i.e. surpassing our commitment of doing the same amount), and did the same for that grandchild (you can have the same beneficiary [our son]) on two accounts as long as you have two different owners [myself on one, my wife on the other]).

We made clear in our initial commitment a few things:

- These funds are for college.
- These funds are not intended to pay the entire cost for college, the parents must share some of the burden.
- Until we get closer to college-age, and can assess the landscape, the funds will remain with our son as the beneficiary and not change to the grandchild. Once we assess what the impact might be on qualifying for aid, we will make adjustments as necessary.
- We are in charge of the investments. We decide what instruments to select, i.e. how aggressive we want to be. Regardless, our minimum commitment is the amount we told them in the first discussion.
- Based on what we have in the 529s, we can make that commitment for the "expected" number of total grandchildren. If our other son and his girlfriend don't have kids, we MAY choose to contribute more funds at some point to the two current grandchildren. No guarantees, and they should plan on no additional funds beyond what's in there now.

Since we own the 529s, we can of course change the beneficiaries and even not distribute the funds. If we took those actions, after making our commitment, I'd expect our son and his wife to cut ties. We have no idea what commitment the grandfather in this case made beyond off the cuff remarks.
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Re: Suddenly have to pay for kids’ colleges

Post by JAusten »

I use Clark Howard out of Atlanta for advice on many things. He gives advice on 529 plans. I have eight great-nieces/nephews which we began 529 plans for early on. We decided on the Utah plan with Vanguard-based funds. Oddly I do not see Utah listed on Clark Howard's list at all. Things change all the time so we will reevaluate 529s and switch if needed.

The ages range from one year to 11 years.

https://clark.com/personal-finance-cred ... /529-plan/

Good luck,
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Re: Suddenly have to pay for kids’ colleges

Post by JackoC »

rob wrote: Sun Jul 25, 2021 10:10 pm
stimulacra wrote: Sun Jul 25, 2021 10:01 pm Never count on verbal promises. If he was serious, you should have set up a 529 account and have him contribute to it. That way you have a measure of certainty in the matter… now you are scrambling a bit.
It would not matter since the grandparent would still control (unless gifted to parent or child). Not counting chickens comes to mind...
Yeah, not directly relevant to OP but is something to keep in mind for people with 529's set up for their or kids' education by others. The account still belongs to the account holder. It makes it socially stickier for that person to later back out than a pure oral promise to pay, but they still can. Irrevocable trusts with kids as beneficiaries are not necessarily impossible to undo, consult a lawyer, but are closer to done deals. Gifts really can't be taken back.

As to 'don't trust other people's promises', which is really what some posters are saying, degree of trust is a basic variable of human life. I don't believe there is any simple absolute answer to it like that. Our kids can trust us, know it, and it's reasonable for them to proceed on that general assumption. Nothing you set out to do for yourself is *100%* certain either so that's not the right benchmark. But case where an older relative said 'I'll pay for it' (and OP gives the impression this wasn't just once over too many beers) and then says 'I'll pay none of it', not 50% etc. based on diminished financial situation or the 6th and 7th grandkids etc., that person is going back on their word IMO. It does happen, obviously.
gmc4h232
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Re: Suddenly have to pay for kids’ colleges

Post by gmc4h232 »

Why wouldn't you open a 529 for the oldest and continue to fund it until the youngest has graduated and just transfer the beneficiary as needed?
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TomatoTomahto
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Re: Suddenly have to pay for kids’ colleges

Post by TomatoTomahto »

stoptothink wrote: Mon Jul 26, 2021 11:38 am I doubt I am the only one who has had family members do MUCH worse than promise a financial gift that they could not ultimately give and not written them off.
That’s why I was careful to include an email detailing that, while we expect to continue gifting our kids to the annual max, that it might end some day depending on expenses, the market, etc. We will try to give them a year or more advance warning but we can’t guarantee it.

We have made no promises about grandchildren or college, and for reasons of fairness, probably never will.
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Re: Suddenly have to pay for kids’ colleges

Post by Broken Man 1999 »

As a grandparent, my biggest fear is screwing up the 529 plans of the grandchildren.

My only commitment thus far was buying prepaid tuition plans for all. Done.

I have been careful to use weasel words about their 529 plans, and the I-bonds I am buying with them as POD. I don't think either will ever be an issue, but I also don't know. I have expressed my intent, if it is possible, I hope to, it is my desire...etc.

To make sure I don't do something foolish with the 529 plans that isn't known to the daughters, I have them listed as interested parties, so they get statements for the 529 plans. I also have them as successors for the 529 plans.

No idea why Grandpa changed his mind. I think sometimes mouths write a check the wallet can't cover. Perhaps Grandpa's offer was undeliverable, despite his best efforts, and he had trouble telling the involved parties.

If I had seven grandchildren, instead of four, there certainly would be less for all.

Good thing is OP's children have parents who can afford their education expenses.

Broken Man 1999
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flyfishers83
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Re: Suddenly have to pay for kids’ colleges

Post by flyfishers83 »

gmc4h232 wrote: Mon Jul 26, 2021 11:28 am Why wouldn't you open a 529 for the oldest and continue to fund it until the youngest has graduated and just transfer the beneficiary as needed?
That's what I've been thinking as well. No downside to opening the 529 now. If the 529 balance increases in value in the next 1-4 years, could use part for the oldest. Otherwise, use for the younger kids.
delamer
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Re: Suddenly have to pay for kids’ colleges

Post by delamer »

flyfishers83 wrote: Mon Jul 26, 2021 12:30 pm
gmc4h232 wrote: Mon Jul 26, 2021 11:28 am Why wouldn't you open a 529 for the oldest and continue to fund it until the youngest has graduated and just transfer the beneficiary as needed?
That's what I've been thinking as well. No downside to opening the 529 now. If the 529 balance increases in value in the next 1-4 years, could use part for the oldest. Otherwise, use for the younger kids.
Agreed.

Every penny of earnings on the 529 plan used for qualified education expenses is tax-free.

If you have $50,000 in a 529, that’s what you can spend on education. With a taxable account, it would be $50,000 minus any taxes due on earnings.

I’m sorry to hear that the grandfather reneged. It’s a crappy thing to do.
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Re: Suddenly have to pay for kids’ colleges

Post by TomatoTomahto »

delamer wrote: Mon Jul 26, 2021 1:50 pm I’m sorry to hear that the grandfather reneged. It’s a crappy thing to do.
There’s reneging, and then there’s reneging on the eve of writing the first check. I can paint many scenarios where gramps couldn’t fulfill his promises, but I find it difficult to paint one where it needed to be a surprise.

I like to be charitable in my views, “walk a mile in someone else’s shoes” and all, but I am finding it difficult. What if OP hadn’t just scored a windfall? What about other grandkids?
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Re: Suddenly have to pay for kids’ colleges

Post by Rudedog »

I paid for my three children's college, two have advanced degrees. You mean I have to pay for my grandchildren's college too ? That could be a load.
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TomatoTomahto
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Re: Suddenly have to pay for kids’ colleges

Post by TomatoTomahto »

Rudedog wrote: Mon Jul 26, 2021 2:22 pm I paid for my three children's college, two have advanced degrees. You mean I have to pay for my grandchildren's college too ? That could be a load.
Yes. I listened to a segment on NPR today about the decline in numbers of children. Among the other reasons (expensive child care, student loan balances, career issues, declining sperm counts (50%!!!), etc.), the expense of college was a factor in choosing to delay starting a family. Then, having delayed, the biological issues become more prominent in determining fecundity.

If you want grandchildren, it might be wise to mention that you’ll be helpful financially. Just don’t promise anything you can’t deliver.
I get the FI part but not the RE part of FIRE.
Da5id
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Re: Suddenly have to pay for kids’ colleges

Post by Da5id »

Rudedog wrote: Mon Jul 26, 2021 2:22 pm I paid for my three children's college, two have advanced degrees. You mean I have to pay for my grandchildren's college too ? That could be a load.
Clearly you don't have to. I intend to at least help once I have grandkids. But then my parents paid for my kids to go to college, so seems like paying it forward is the thing to do.

I think the only issue people here are having is grandpa promising (apparently, details are sketchy) to pay for the kids college. Then at the very last minute saying "never mind". I generally believe one should be honest in life, and particularly so with ones relatives. If there is a chance that one can't keep a commitment, it should be communicated as soon as possible.
delamer
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Re: Suddenly have to pay for kids’ colleges

Post by delamer »

TomatoTomahto wrote: Mon Jul 26, 2021 2:19 pm
delamer wrote: Mon Jul 26, 2021 1:50 pm I’m sorry to hear that the grandfather reneged. It’s a crappy thing to do.
There’s reneging, and then there’s reneging on the eve of writing the first check. I can paint many scenarios where gramps couldn’t fulfill his promises, but I find it difficult to paint one where it needed to be a surprise.

I like to be charitable in my views, “walk a mile in someone else’s shoes” and all, but I am finding it difficult. What if OP hadn’t just scored a windfall? What about other grandkids?
Absolutely.

Although until the money is in an account that I control, I wouldn’t assume that it was going to be available to me.

On a much smaller scale, my parents gave my kids money each year on their birthdays that was earmarked for college. But as my mother developed dementia, it was hit or miss as to whether the birthday would even be remembered or that the check would arrive. If those last few thousand dollars had been critical, loans would have to have been taken out to make up the deficit.
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retiringwhen
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Re: Suddenly have to pay for kids’ colleges

Post by retiringwhen »

OP, one reason to open 529's for you kids even if the growth period is short would be to essentially create a trust for their education.

My wife and I, as part of our latest estate plan, fully funded our son's college via a 529 to ensure that he "was taken care of first" if both left our earthly bonds. It was easier than setting up trusts, and special will clauses, etc. Our older kids were past college age at that point and our commitments to them had passed.

It worked well and the accounts were liquidated at the same time they weren't needed anymore! :happy
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Re: Suddenly have to pay for kids’ colleges

Post by Misenplace »

A number of off topic posts commenting about Grandpa threatened to derail the thread, and were removed.

Please keep on the topic- should OP open 529s.

Also, if you see a post that is in violation of forum guidelines, please don't engage and reply to it, thereby further trolling the thread. Instead, simply report the post using the handy-dandy icon "!" that you will find in the top right corner. It makes the moderator's job a lot easier.
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Re: Suddenly have to pay for kids’ colleges

Post by GoldenFinch »

[Deleted quoted posts, and comment, removed by Moderator Misenplace]

The lessons from this post are two.

1. Don’t tell people you are going to give them something in the future because they may count on you to come through. You have to consider that it is in the future and maybe you won’t be able to live up to your word. If you want to be generous, be generous and give. But promises that don’t materialize can mess other people’s lives up if they plan around the promises (which would have been understandable in this case).

2. When someone promises you something in the future it may be best to plan as if it will never happen because maybe it won’t.

To the OP, state universities are often a good affordable choice for motivated kids.
TheDDC
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Re: Suddenly have to pay for kids’ colleges

Post by TheDDC »

Rudedog wrote: Mon Jul 26, 2021 2:22 pm I paid for my three children's college, two have advanced degrees. You mean I have to pay for my grandchildren's college too ? That could be a load.
Yeah, I was already thinking grandpa probably doesn't really care about anyone's opinions flying around on here. (That's not an insult BTW).

I'm not a fan of 529s anyway. Cash is cash, it is fungible, and it can be used anytime for anything. Sell a business, hustle it at the pool hall, take a distribution, whatever. If you lock up your cash in a 529 it's only got one purpose and you get hit with a penalty and taxes otherwise.

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Da5id
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Re: Suddenly have to pay for kids’ colleges

Post by Da5id »

TheDDC wrote: Mon Jul 26, 2021 3:59 pm I'm not a fan of 529s anyway. Cash is cash, it is fungible, and it can be used anytime for anything. Sell a business, hustle it at the pool hall, take a distribution, whatever. If you lock up your cash in a 529 it's only got one purpose and you get hit with a penalty and taxes otherwise.
I'd not overdo the 529s, but with a succession of 3 kids having some money in a 529 probably wouldn't get penalized as you can retask the accounts. And with younger related kids (there are 7 total per OP) in worst case the money could be moved around the family. That said, living in Texas where the 529 contributions aren't deductible is rather a blow against the plan.
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obafgkm
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Re: Suddenly have to pay for kids’ colleges

Post by obafgkm »

JAusten wrote: Mon Jul 26, 2021 9:42 am I use Clark Howard out of Atlanta for advice on many things. He gives advice on 529 plans. I have eight great-nieces/nephews which we began 529 plans for early on. We decided on the Utah plan with Vanguard-based funds. Oddly I do not see Utah listed on Clark Howard's list at all. Things change all the time so we will reevaluate 529s and switch if needed.
(...)
https://clark.com/personal-finance-cred ... /529-plan/
At the link above, I see Utah mentioned in the "Dean's List".
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RickBoglehead
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Re: Suddenly have to pay for kids’ colleges

Post by RickBoglehead »

JAusten wrote: Mon Jul 26, 2021 9:42 am I use Clark Howard out of Atlanta for advice on many things. He gives advice on 529 plans. I have eight great-nieces/nephews which we began 529 plans for early on. We decided on the Utah plan with Vanguard-based funds. Oddly I do not see Utah listed on Clark Howard's list at all. Things change all the time so we will reevaluate 529s and switch if needed.

The ages range from one year to 11 years.

https://clark.com/personal-finance-cred ... /529-plan/

Good luck,
Utah is at the bottom, begins with U... :D
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runwyrlph
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Re: Suddenly have to pay for kids’ colleges

Post by runwyrlph »

Check your state 529 rules. There may be a state benefit. In my state money contributed to 529 plan is state tax deductible. You can contribute to the plan, take a qualified withdrawal to pay tuition, and get a state tax deduction.

(Edit: Sorry, I missed the info above that Texas doesn't allow deduction for contributions. However if anyone else is thinking about similar question, it might be worth a look at your state's rules.)
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TomatoTomahto
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Re: Suddenly have to pay for kids’ colleges

Post by TomatoTomahto »

runwyrlph wrote: Tue Jul 27, 2021 2:43 pm Edit: Sorry, I missed the info above that Texas doesn't allow deduction for contributions. However if anyone else is thinking about similar question, it might be worth a look at your state's rules.)
Unless I misunderstand Massachusetts tax law, we get a whopping $100 benefit per year on our taxes. Still, it’s $100, which is a great lunch or pretty good dinner. Tax free growth regardless.
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HomerJ
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Re: Suddenly have to pay for kids’ colleges

Post by HomerJ »

TomatoTomahto wrote: Mon Jul 26, 2021 2:19 pm
delamer wrote: Mon Jul 26, 2021 1:50 pm I’m sorry to hear that the grandfather reneged. It’s a crappy thing to do.
There’s reneging, and then there’s reneging on the eve of writing the first check. I can paint many scenarios where gramps couldn’t fulfill his promises, but I find it difficult to paint one where it needed to be a surprise.

I like to be charitable in my views, “walk a mile in someone else’s shoes” and all, but I am finding it difficult. What if OP hadn’t just scored a windfall? What about other grandkids?
I can easily paint a scenario where the grandpa changes his mind right after the OP scores a windfall (for example, if the OP went out and spent a bunch of money frivolously).

But that doesn't explain the other grandkids in other families.

(The above was just a hypothetical)
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Monsterflockster
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Re: Suddenly have to pay for kids’ colleges

Post by Monsterflockster »

DolfanAtx wrote: Sun Jul 25, 2021 5:01 pm Long story short, my kids’ grandpa was going to pay for their college and as my oldest is entering his senior year in high school, grandpa said he’s not paying. Said he’s changed his mind for all 7 grandkids and mine are the oldest so it impacts me now.

Kids are incoming 12th grade. 9th, and 6th.

Good news is that I just sold my business so I have the cash to fund them but have never set up a 529 (I’m in Texas).

Confused about where to start. Is it as simple as calculating how much I think all 3 kids will need and then fund a 529 fully, or contribute annually over the next several years?

What if Grandpa changes his mind in the last moment? Is this just a 10% fee to reallocate?

Any resources would be greatly appreciated.

Thanks in advance.
Why do you need to pay for it? They aren’t putting any skin in the game?
DiMAn0684
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Re: Suddenly have to pay for kids’ colleges

Post by DiMAn0684 »

TomatoTomahto wrote: Tue Jul 27, 2021 2:57 pm
runwyrlph wrote: Tue Jul 27, 2021 2:43 pm Edit: Sorry, I missed the info above that Texas doesn't allow deduction for contributions. However if anyone else is thinking about similar question, it might be worth a look at your state's rules.)
Unless I misunderstand Massachusetts tax law, we get a whopping $100 benefit per year on our taxes. Still, it’s $100, which is a great lunch or pretty good dinner. Tax free growth regardless.
Pretty sure you got that right. Current benefit rule expires in 2021, hopefully they extend it and up the amount.
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