For many affluent families, the question isn’t whether they can afford college—it’s how to fund it in a way that strengthens their long-term wealth strategy. When coordinated thoughtfully, education planning can complement tax and estate goals, reinforce family values, and create lasting opportunities for future generations. From tax-advantaged accounts to intergenerational gifting strategies, education funding can be far more than paying tuition—it can be a meaningful part of your family’s legacy plan.
More Than Tuition: Why College Planning Matters for Wealth Strategy
College costs continue to rise, reaching over $43,000 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:
- Reduce future estate tax exposure
- Shift assets to younger generations in a tax-efficient manner
- Reinforce family values around education and opportunity
- Preserve control while promoting stewardship
Education is more than an expense; it can be a cornerstone of long-term family governance and financial architecture.
529 Plans: A Multi-Generational Wealth Vehicle
529 plans are often underutilized by wealthy families who could benefit significantly from their flexible and tax-efficient features—not only for education funding, but also 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 Through Gifting: Contribute up to $19,000 annually per beneficiary ($38,000 for married couples), or front load up to five years worth of gifts ($190,000 per beneficiary) without incurring gift tax or using your lifetime exemption.
- Roth IRA Rollover Option: Up to $35,000 of unused 529 funds can be rolled into a Roth IRA in the beneficiary’s name (subject to conditions), giving children or grandchildren a tax-advantaged head start on retirement.
- Flexible Control: You can change the beneficiary to another relative—such as a sibling or cousin— at any time ensuring funds stay useful even if one child doesn’t need them.
- Retention of Control: While assets move out of your estate, the account owner retains full control over how and when funds are distributed.
When paired with broader gifting strategies, a 529 plan allows families to reduce taxable estates while investing directly in the success of future generations.
Trump Accounts: A New Option to Watch
The recently introduced Trump Accounts add another layer to education funding strategy. Designed for children under 18, these custodial savings vehicles share some traits with Roth IRAs and 529 plans but come with their own rules and restrictions. Contributions are made with after-tax dollars, and growth is tax-free if used for approved purposes. Because Trump Accounts are new and many details still need to be ironed out, families should approach them with careful planning—and coordinate their use with other, more established strategies.
Learn More About Trump Accounts Here.
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. These payments do not count against annual exclusion limits or lifetime exemptions.
This approach:
- Offers 100% estate and gift tax exemption
- Can be used alongside 529 contributions for maximum flexibility
- Allows grandparents and other relatives to support education without reducing additional gifting capacity
For families seeking to preserve wealth while funding education in real time, this can be a simple and highly effective tactic.
Custodial Accounts (UTMA/UGMA): Use with Caution and Planning
Uniform Transfers to Minors Act (UTMA) and Uniform Gifts to Minors Act (UGMA) accounts allow for broader uses—including tutoring, travel and enrichment—but they are less favorable for families seeking long-term control.
Key Considerations:
- Assets belong to the child and become fully accessible at age of majority (typically 18 or 21)
- They may impact financial aid eligibility
- They offer minimal protection from imprudent spending or outside influences
As a result of these limitations, many high-net-worth families either limit the use of custodial accounts or incorporate them into trusts or governance structures that provide clearer direction and greater oversight.
Education Planning as a Platform for Family Governance
Education funding often becomes a natural on-ramp for wealth transfer discussions, teaching monetary responsibility and reinforcing family values.
At Heritage Financial, we encourage clients to use education funding as a platform for:
- Introducing financial education to children and grandchildren
- Structuring family conversations around values and opportunity
- Establishing education trusts or endowments to support multiple generations
- Setting expectations and guidelines for responsible access and use of funds
This not only supports learners but also cultivates responsible future stewards of wealth.
Coordinating Education with Broader Wealth Goals
Even for affluent households, strategic coordination is essential.
- Retirement Planning: Help ensure that your generosity today does not compromise your future independence. Education funding should be aligned with a well-funded retirement plan.
- Philanthropy: Consider extending impact by creating scholarships through family foundations or donor-advised funds, aligning education support with broader charitable goals.
- Trust Planning: Education clauses within irrevocable trusts can define how wealth may be used and under what conditions—blending structure with opportunity.
Our Perspective: Plan Beyond the Tuition Check
At Heritage Financial, we guide high-net-worth families in reframing college funding from a short-term expense into a long-term strategic opportunity. Education is one of the most value-driven components of a legacy and among the most impactful when approached with structure, flexibility, and foresight.
We work closely with families to:
- Align education funding with tax, estate, and investment plans
- Design gifting strategies that help preserve wealth and promote stewardship
- Facilitate intergenerational discussions that empower the next generation
We Can Help Build a Smarter Education Plan
Whether you are planning for your child, grandchild, or future generations, your approach to education funding can strengthen your overall wealth strategy. Our team can help integrate education funding into a holistic financial plan that supports your values, legacy, and your long-term goals.
[1]Trends in College Pricing and Student Aid 2024, https://research.collegeboard.org/media/pdf/Trends-in-College-Pricing-and-Student-Aid-2024-ADA.pdf
