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Funding tuition bills--long a tax-efficient way to pass money onto future generations--just got a boost as an estate-planningtool.
A recent IRS ruling suggests that taxpayers can not onlycontribute to annual tuition costs without incurring estate andgift taxes, but can also contribute tuition for several years atonce, says Susan C. Frunzi, a partner at law firm Schulte Roth& Zabel LLP in New York City. "There's always been anexemption from gift tax and generation-skipping tax for tuitionpaid directly to a school," says Frunzi. "But this rulingclarifies that you can prepay tuition for multiple years and stillqualify for the exemption."
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