Education Planning for Families and Grandparents
How families and grandparents can fund education tax-efficiently using 529 plans, direct tuition payments, and gifting strategies.
For many families, education funding is one of the most meaningful gifts they can give — and one of the most overlooked planning opportunities from a tax standpoint.
At Windward, we help clients build education funding strategies that fit into their broader financial and tax plans. Here is what we discuss most often.
529 Plans: The Foundation of Most Education Plans
A 529 plan is a tax-advantaged savings account designed specifically for education expenses. Contributions grow tax-free, and withdrawals for qualified education expenses — tuition, room and board, books, and more — are also tax-free.
Key points worth knowing:
State tax deductions - Kansas residents can deduct contributions to any 529 plan — not just Kansas plans — up to $3,000 per beneficiary for single filers or $6,000 for married filing jointly. Missouri residents enjoy the same flexibility, with deductions available for contributions to any state's 529 plan, up to $8,000 per year for single filers or $16,000 for married filing jointly.
Superfunding - You can make a lump-sum 529 contribution of up to five times the annual gift tax exclusion — $95,000 per beneficiary in 2026 ($190,000 for a married couple) — and elect to treat it as spread over five years for gift tax purposes. Because the annual exclusion adjusts periodically for inflation, the superfunding maximum will increase over time as well. This can be a powerful tool for grandparents who want to make a significant contribution.
Flexibility - If a beneficiary does not use all the funds, the account can be transferred to another family member — or, under recent law, up to $35,000 can be rolled into a Roth IRA for the beneficiary after 15 years, subject to certain conditions.
Direct Tuition Payments: An Often-Overlooked Strategy
One of the most underused education planning tools is also one of the simplest: payments made directly to an educational institution on someone's behalf are completely excluded from gift tax — with no dollar limit.
This means a grandparent could pay $50,000 directly to a college or university on behalf of a grandchild without it counting against their annual gift tax exclusion or their lifetime exemption. This can be layered on top of regular annual exclusion gifts, making it an exceptionally efficient way to transfer wealth.
The key requirement: payment must go directly to the institution, not to the student or parent.
Coordinating Education Planning With Your Estate Goals
For grandparents who are also thinking about eventual wealth transfer, education funding can be a meaningful part of the overall picture. Direct tuition payments, 529 superfunding, and annual exclusion gifts can work together to reduce a taxable estate while funding something deeply meaningful.
As always, we work alongside your estate planning attorney on any strategy that involves trust structures or significant gifts — our role is to make sure the financial and tax planning supports the legal structure your attorney puts in place.
The Windward Approach
Education funding is not just about picking a savings account. It is about building a strategy that fits your family, your tax situation, and your goals. We review education planning as part of our comprehensive financial planning conversations — not as a separate discussion.
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