Private school tuition: Engage wealthy families across generations

Key takeaways

• Helping high-net-worth families strategize around private school tuition costs is an effective way to connect with your clients’ heirs and earn their trust. 
• Show clients how to incorporate tax strategies into their plans for paying for private school.
• Use our guide to start the conversation with your clients and engage their family members.

Paying for private school can be a pain point for clients

Paying for private school can be a strain on a family’s finances, even for your high-net-worth clients. The average private day school in the United States cost $30,692 per student per year. Boarding schools? An astonishing $69,150.¹ Having three small children of my own, I shudder to think about how these costs add up. Private day school would cost my family more than $1.2 million, and if we chose boarding school, the cost would approach $2.7 million. Ouch.

Private school tuition is a major expense
Average tuition, K-12

Helping clients plan around these costs enhances your value as an advisor and it’s an effective way for you to build relationships with your clients’ heirs and retain business in the future.

Educate clients about the less-known advantages of 529 plans

If you ask private school families how they pay their tuition bills, they will likely give you more than one answer, potentially including current income, tightened budgets, loans and assistance from the students’ grandparents. While many of these families invest in 529 education saving accounts for college, few of them know they can, in most states, withdraw up to $10,000 per student, per year to pay K-12 education costs. This creates an opportunity for you to educate clients about 529 plans and engage their families in the conversation.

Private school tuition is not tax deductible, but you can help clients reduce tax costs

High-net-worth clients often ask if private school tuition can be deducted from their taxable income. You may have to be the bearer of disappointing news (there is no tax deduction for private school tuition), but you can help your clients incorporate tax strategies into their plans for paying tuition.

While 529 plans are well known for their tax-free growth potential, they also offer account owners an opportunity to reduce estate taxes by gifting money to a beneficiary. The giver effectively moves assets away from their estate while maintaining control of the assets, including how they are invested, who receives them and how they are used. The beneficiary can be changed to another family member without tax consequences, so unused savings can continue to grow tax free to help fund education costs for the next generation and the generation after that and so on. Alternatively, unused funds can be transferred to a Roth IRA.

Additionally, inform your clients that in 2025, individuals can gift up to $19,000 ($38,000 for a married couple) per beneficiary or give an accelerated five-year gift of $95,000 ($190,000 for a married couple) with no impact to their lifetime gift tax exemption. Gifts in the form of tuition payments made directly to the beneficiary’s school are never subject to gift taxes.

Bring your clients’ heirs into the discussion

High-net-worth advisors say that aside from client acquisition, the greatest challenge for their business today is the transfer of generational wealth.² Advisors lose roughly 70% of the assets that change hands through inheritance.³ And with a massive $105 trillion of wealth set to transfer from aging clients to their heirs over the next 25 years, there is much at stake.²

An advisor’s best defense is to proactively build relationships with the inheritors of their clients’ assets, yet only 41% of high-net-worth practices report that their clients’ children are established clients or involved in the family’s financial planning process.² An effective strategy for fostering multi-generational client relationships is to connect with the entire family about issues that impact both asset owners and beneficiaries, like paying for private school.

Advisors lack relationships with their clients’ heirs
High-net-worth advisors’ relationships with clients’ children and grandchildren

Start the conversation with your client

I’ve talked with advisors who have successfully extended their client relationships to multiple generations by talking about private school tuition. Most often, the conversation starts with clients who have grandchildren and goes like this…

Private school conversation guide

Consider using the above conversation guide and ask clients for warm introductions to their family members. The earlier you begin building relationships with your clients’ heirs, the greater the likelihood they will be your trusting clients in the future.

Serve high-net-worth families for generations to come

When you help your high-net-worth families strategize around private school tuition, you increase your value as their advisor and create an opportunity to build rapport with their heirs. BlackRock can help you attract and retain clients with education savings plans and tax strategies. Contact your Market Leader or use our online resources to learn more.

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