Back-to-School Funding: Grandparent Gifting Strategies Under the New Exemption
The annual gift tax exclusion and this year's higher lifetime exemption open up more room than many grandparents realize for funding a grandchild's education — without touching a 529.
Grandparents often want to help fund a grandchild's education, but many assume the only vehicle for doing that is a 529 plan. Many also assume they need to consult an estate attorney before writing a meaningful check. Neither assumption is quite right.
The $19,000 annual gift tax exclusion for 2026, and this year's increased $15 million lifetime exemption, both create more room than most grandparents realize — and some of the simplest options don't touch a 529 at all.
The Annual Exclusion Does More Work Than People Realize
Each grandparent can give up to $19,000 per grandchild in 2026 — $38,000 if both grandparents give — with no gift tax return required and no impact on the lifetime exemption at all. For a family with several grandchildren, that adds up quickly and can be repeated every year. It's easy to underuse simply because nobody revisits the number annually as it's adjusted for inflation.
Paying Tuition Directly Doesn't Even Count as a Gift
There's a separate, uncapped exclusion for tuition paid directly to an educational institution — it doesn't count against the annual exclusion or the lifetime exemption at all, regardless of the amount. The payment has to go directly to the school, not to the student or their parents, but for a grandparent who wants to make a larger one-time contribution toward tuition, this is often the simplest and most tax-efficient path available.
Where a 529 Still Makes Sense
A 529 plan is still the better vehicle for tax-deferred growth over time, and grandparents can front-load up to five years of annual exclusion gifts into a 529 in a single year — $95,000 in 2026, or $190,000 for a grandparent couple — without using any lifetime exemption, as long as no additional gifts are made to that grandchild during the five-year period.
The Higher Lifetime Exemption Adds Flexibility Too
For grandparents inclined to give more than the annual exclusion allows, this year's $15 million lifetime exemption ($30 million for a couple) creates meaningfully more room than in recent years to make a larger gift and simply apply it against the lifetime number, without any gift tax due at the time of the gift.
The Windward Approach
The right combination — direct tuition payments, annual exclusion gifts, 529 front-loading, or a larger gift against the lifetime exemption — depends on the family's broader estate plan and how much flexibility the grandparent wants to retain. We model this alongside the rest of a family's gifting and estate strategy rather than as a standalone education question.
Want to learn more about private wealth planning?
This content is provided by Windward Private Wealth Management Inc. (“Windward” or the “Firm”) for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. No portion of this blog is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Certain information contained in the individual blog posts will be derived from sources that Windward believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages.
Windward is an SEC registered investment adviser. The Firm may only provide services in those states in which it is notice filed or qualifies for a corresponding exemption from such requirements. For information about Windward’s registration status and business operations, please consult the Firm’s Form ADV disclosure documents, the most recent versions of which are available on the SEC’s Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov.