If you are searching for a way to give a lifelong gift while at the same time protecting your assets, a 529 College Savings Plan may be an option you should explore.
Funding With Stock
Parents and Grandparents often want to use shares of stock for a child's education fund.
Gifting Stock or Stock Proceeds
There are two main ways to do this:
Transfer the shares into a custodial account, or
Sell the shares to fund a 529 state college savings plan
If you are gifting stock, you can consolidate the shares into a Uniform Transfers to Minors Act (UTMA) account at your brokerage. The main advantage to this method is that, as a minor, the child can collect up to $950 annually in investment income tax-free (if the child has no other significant income), and the next $950 is not subject to tax either.
Usually, the preferred method is to sell the shares and invest the proceeds into a 529 plan, naming the child as the beneficiary. You will be responsible for the tax bill now, but future growth will be tax-free and so will the withdrawals if they are used as intended, for college expenses.
However, as the shares appreciate, so does the tax liability on the gain the child will have to report once they sell the stocks to pay for college. The funds in the account are also taken into consideration when applying for financial aid.
Another benefit to a 529 is if the child decides not to attend college, the funds can be applied to another child for their education.
A Private Asset Trust can define the trust and provisions that will not eliminate potential grants or decrease the amount of aid the student would receive. Special language is required. Only a Private Asset Trust can accomplish this.