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Turn on the HEET for education

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With the onset of cold weather in many parts of the country, grandparents of college-bound children may seek some warmth in a smart tax-saving device.

Strategy: Investigate the possibilities offered by a HEET (pronounced “heat”). It stands for “health and education exclusion trust.” Typically, a HEET is used by well-to-do individuals to help finance their grandchildren’s college educations or to pay for their medical expenses.

A HEET is essentially a version of the dynasty trust that’s been prevalent for years. But what makes HEETs especially hot these days is they can sidestep estate tax and generation-skipping transfer tax (GSTT) traps that might hinder other arrangements.

Here’s the whole story: In the normal course of events, lifetime gifts made by a taxpayer are subject to federal gift tax, but are usually sheltered from the tax by two gift-tax provisions.

  • The annual gift-tax exclusion allows you to give gifts up to a ...(register to read more)

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