Retirement & Financial Planning Report

Contributions to state qualified tuition plans (see above) are considered gifts so they count toward to $10,000 annual gift tax exclusion ($20,000 for married couples). That is, you are allowed to give your grandson Bill $10,000 this year, free of gift tax, but if you contribute $2,000 to a college savings plan on his behalf your remaining gift tax exclusion for Bill will be reduced to $8,000. If you make a larger donation — up to $50,000 — to a state tuition plan, you can elect to spread the outlay over five years, for gift tax purposes.