For many affluent families, the question is not whether they can afford college, but how to effectively fund it in a way that complements their wealth planning, tax strategy and legacy goals. From tax advantaged education accounts to multigenerational gifting strategies, education funding offers powerful opportunities to enhance financial efficiency and transfer wealth intentionally. Whether you are supporting your child’s primary schooling, secondary education or planning for multiple generations of learners, a thoughtful approach can amplify your impact and help achieve the family legacy you’re seeking.
Why College Planning Matters for Wealth Strategy
College costs continue to rise, reaching over $58,000 per year on average at private institutions[1]. The real opportunity for high-net-worth families lies not simply in covering expenses, but in aligning education funding with estate, tax and legacy objectives.
With the right approach, education funding can help:
Education planning can be a cornerstone of long-term family governance and financial architecture.
529 Plans Serve as a Multigenerational Wealth Vehicle
529 plans are often underutilized by wealthy families who could benefit significantly from their unique features not only for education funding, but for estate and legacy planning.
Key Strategic Benefits:
Tax-Free Growth: Investments grow tax-deferred, and withdrawals are tax-free when used for qualified education expenses.
Estate Reduction via Gifting: Contribute up to $19,000 annually per beneficiary ($38,000 for married couples) or front load five years’ worth of gifts to $190,000 per beneficiary without incurring gift tax or using your lifetime exemption.
Roth IRA Rollover Option: As of 2024, families can roll over up to $35,000 of unused 529 funds into a Roth IRA in the beneficiary’s name, subject to conditions. This can serve as a tax-advantaged head start on retirement for your children or grandchildren.
Flexible Use: You can change the beneficiary to another relative at any time, giving you flexibility across siblings, cousins or future generations.
Target Date Optionality: 529 plans are typically tied to a target date, allowing investors to select a risk adjusted strategy that aggressively grows funds in the early years and conservatively preserves assets as the targeted date approaches. Given this nature, 529 investments do not provide the same flexibility one would find within a custodian account such as a Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA).
Strategic Retention of Control: Though assets are removed from your estate, the account owner retains full control over how and when funds are distributed.
A 529 plan, when coordinated with broader gifting strategies, can provide a tax efficient way to reduce estate size while investing in your family’s future.
Custodial Accounts (UTMA/UGMA): Use with Caution and Planning
While Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA) accounts allow for broader use including for tutoring, travel and enrichment, they are less favorable for families seeking long-term control.
Considerations include:
As a result of these limitations, many high-net-worth families limit the use of custodial accounts or incorporate them into broader trust or governance structures that provide clearer direction and oversight.
Direct Gifting to Educational Institutions: Unlimited and Exempt
In addition to 529 plans, affluent families can reduce their taxable estates by making unlimited tuition payments directly to educational institutions without impacting annual exclusion limits or lifetime exemptions.
This approach:
It is an effective tactic for families seeking to fund education in real time, maintain their annual gift exclusion and preserve wealth; all while meeting IRS criteria.
Coordinating Education with Broader Wealth Goals
Even for affluent households, strategic coordination matters.
Retirement Planning: Help ensure that your generosity today does not compromise your independence later. Funding 529s or direct tuition payments should align with a well-funded retirement plan.
Philanthropy: Use education support to extend impact. Consider setting up scholarships through family foundations or donor-advised funds, aligning with broader charitable goals.
Trust Planning: Education clauses can be written into irrevocable trusts to define how wealth may be used and under what conditions, blending structure with opportunity.
Our Perspective: Plan Beyond the Tuition Check
At Clarendon Private, we help high-net-worth families approach college funding as a strategic opportunity. Education itself is an investment. How education is funded can serve as a valuable component of legacy planning and most impactful when approached with structure, flexibility and foresight.
We work closely with families to:
We Can Help Build a Smarter Education Plan
Whether you are planning for your child, grandchild or a future generation, your approach to education funding can strengthen your overall wealth strategy. We can provide ideas about how to integrate college planning into a holistic plan that supports your values, legacy and long-term goals. Contact Clarendon Private to begin building your custom education funding strategy today.
Sources
[1]Trends in College Pricing and Student Aid 2024, research.collegeboard.org/media/pdf/Trends-in-College-Pricing-and-Student-Aid-2024-ADA.pdf. May 2025. Table CP-1
Disclosures
The information provided is illustrative and for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
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