can sister pay brother's tuition?

[gr8fldadd]

S is sophomore in college, S is Senior in HS, going to college in the fall (same in-state public college in virginia). D has twice as much money in her investment account earmarked for college as he does. My parents have moved her 529 money (their account) into his name to even things up, but there will still be a point where we need her to use some of her money (she’s happy and willing to do it) to pay his tuition. My question is, does she need to gift the money to him (14K limit per year or there are tax implications) or could she simply write a check for his tuition? Thanks

[4kidsdad]

If you daughter pays her brother’s tuition directly to school, there is no 14K limit. See How to make unlimited financial gifts tax-free - CBS News

Tuition expenses

The IRS (specifically, section 2503(e) of the Internal Revenue Code) provides gift-tax exclusion for any amount paid on behalf of an individual as tuition to educational organizations for the education or training of the recipient. The exclusion is available regardless of the relationship between the donor (the person making the gift) and donee (the person benefiting from the gift) and is in addition to the annual $14,000 per person per year gift tax exclusion. The exclusion only applies to tuition costs and does not apply to amounts paid for books, supplies, dormitory fees, board or related expenses that do not constitute direct tuition costs.

In order for the exclusion to apply, two requirements must be met. First, the tuition must be paid directly to the qualifying educational institution. And don’t make the common mistake of thinking reimbursements made to the student for tuition expenses previously paid qualify – they don’t. Second, if funds are transferred by the donor to a trust providing for distributions to be made by the trustee for tuition expenses incurred by a trust beneficiary, the transfer is not a direct transfer to an educational organization and thus does not qualify for the exclusion. Payments for books, supplies, dormitory fees, board and similar expenses do not qualify for this special exclusion.

The educational organization to which the tuition is paid must meet prescribed criteria. A qualified educational organization is one that maintains a regular faculty and curriculum and that has a regularly enrolled body of students at the place where its educational activities take place.

[annoyingdad]

Is this 529 money in her name or where she’s the beneficiary or just an investment account?.

Any costs she pays for her brother would have to be reported on the following years financial aid forms. If she gifts it and he still has it in an account it would be his asset for finaid forms.

[gr8fldadd]

Thanks 4kidsdad and annoying dad. 529 is almost all in her brothers name at this point (my parents are the named beneficiaries on this account- I am secondary beneficiary) so that part is fairly simple because my father can switch assets back and forth as he wants. Their investment accounts (equities and cash) are the ones that are a little more complicated.