Two kids, four years apart

Who

A two-income couple in their early fifties: a physician employed by a hospital system and a corporate attorney who also runs a small consulting practice on the side as a sole proprietorship, reported on Schedule C. Two children, aged 15 and 11. The older child was starting to talk about Rice and a couple of out-of-state private universities. Both sets of grandparents wanted to help with college.

What they came in with

• A 529 for each child, opened at different times and funded unevenly. No one had set a target, so they could not say whether they were ahead or behind.
• A UTMA account a grandparent had opened for the older child, now worth well into six figures, generating kiddie tax each year and sitting entirely in the child's name with no plan for it.
• They assumed a family with their income would get no financial aid, so they had not planned to file the FAFSA or the CSS Profile, which Rice and many private colleges require.
• The children occasionally helped with the consulting practice, unpaid.
• Grandparents offering to "write a check" for tuition, without anyone having thought through the gift tax reporting or the aid implications.
• Retirement savings behind where they should be for their income, because college had quietly become the priority.

What we did

• Set the target. We agreed on what the family would pay for (four years at a private-university cost of attendance for each child, with a stated inflation assumption), compared it with the current 529 balances and set a monthly contribution for each account. The older child's account needed more; the younger child's needed less than they had been adding.
• Grandparents. Instead of writing checks to the parents, each set of grandparents opened grandparent-owned 529s for the grandchildren and used the five-year gift election, which allows up to $95,000 per beneficiary from one person in 2026, or $190,000 from a couple, reported on Form 709. Grandparent-owned 529s are not reported on the FAFSA, and the gift leaves the grandparents' estate once the five-year election period has run. We also explained the alternative of paying tuition directly to the school, which is excluded from gift tax entirely, and when each approach fits. See How much can I give tax-free in 2026?
• UTMA. New contributions stopped. Because the money is legally the child's and a student's assets count heavily against aid, we mapped out spending it before and during college on expenses that benefit the child and go beyond a parent's basic support obligation, such as a laptop, summer programs, a car at 16 and tuition, and directed new savings to the 529 instead.
• Children on the payroll. For genuine work in the consulting practice, the older child was put on payroll at a documented, reasonable wage, with the younger child to follow for age-appropriate tasks. Because the practice is a sole proprietorship, wages to the owner's child under 18 are exempt from Social Security and Medicare taxes (that exemption doesn't apply if the business is an S corporation), and a child's earned income up to the standard deduction ($16,100 in 2026) is federal income tax free. The older child's wages funded a Roth IRA, which requires earned income, and part of their own college costs.
• Aid planning. We built a FAFSA and CSS Profile timeline for the older child, including base-year timing so a planned sale of appreciated stock happened in a year the forms would not pick up. Rice is a CSS Profile school, so we walked through what the Profile asks that the FAFSA does not, including grandparent-owned 529s.
• Retirement first. The parents' workplace retirement plan deferrals went to the maximum, and both began annual backdoor Roth contributions, ahead of any extra 529 funding beyond the targets. See the college planning guide for high-net-worth families.

Outcome

• A written per-child funding target and a contribution schedule that fits alongside maxed-out retirement contributions, rather than instead of them.
• Grandparents' gifts structured so they help with college, stay off the FAFSA and reduce the grandparents' taxable estate, with the gift tax returns handled by their own accountant.
• The UTMA problem contained: no new money added, a spend-down plan in place, and the older child's wages building a Roth IRA.
• A FAFSA and CSS Profile plan the family will actually follow, with a realistic view of merit versus need-based aid at the schools on the list.

What it cost

See the fee summary at the top of this page. Mercer Street does not manage the 529 or retirement accounts and earns nothing on contributions.