Education Planning

With the rising cost of education, proper planning can help assure that a student has the funds to pursue the learning that is best for them. There are numerous vehicles that allow families to plan for educational needs, and proper planning can have beneficial tax advantages. As a Certified College Planning Specialist® Gary can provide professional guidance to assist you in making the appropriate choice(s).

529 Saving Plans

These state-sponsored plans offer flexible, tax-deferred ways to save and allow a student to choose any accredited institution, college, university or vocational school. In order to find the best plan, you are permitted to select a plan administered by any state in America. In certain states there are tax advantages when utilizing an in-state plan.

With a 529 plan, earnings are free from federal taxes (if used for qualified higher education expenses). The plan owner – rather than the beneficiary – remains in control of the investments. These plans have generous contribution limits regardless of income level, and you may choose the investment strategy that is right for you. 529 plan contributions are typically excluded from your taxable estate and may not be subject to gift taxes. Also you may transfer a 529 plan to other family members.

Earnings in 529 plans are not subject to federal tax and in most cases state tax, as long as you use withdrawals for eligible college expenses, such as tuition and room and board. However, if you withdraw money from a 529 plan and do not use it on an eligible college expense, you generally will be subject to income tax and an additional 10% federal tax penalty on earnings.

An investor should consider, before investing, whether the investor's or designated beneficiary's home state offers any state tax or other benefits that are only available for investments in such state's qualified tuition program.

529 Prepaid Saving Plans

These plans allow you to purchase a certain percentage of tuition, over time, which is guaranteed to be equivalent to the same percentage of tuition in the future. Although we do not offer 529 prepaid plans, we can assist you in determining if a 529 prepaid plan is appropriate and/or available in your state.

UGMA/UTMA Custodial Accounts

The Uniform Gifts/Transfers to Minors Act allows one to transfer ownership of assets to a child without the need of establishing a traditional trust. While not specifically designed for educational funding, these accounts can be advantageous as they allow funds to accumulate in a child’s name. The earnings are taxed at the child’s tax rate, there are no contribution limits, and the grantor makes the investment decisions on behalf of the child. Contributions are irrevocable, and when the child reaches the age of majority, the grantor loses all control of the assets.

Coverdell Education Savings Accounts

Formerly known as the "Education IRA," this savings alternative is a trust or custodial account used for primary or secondary higher education expenses. There is a $2,000 per year contribution limit (subject to household income limitations), and earnings are taxed and subject to a 10% penalty if not used for education purposes. Contributions must stop when the beneficiary becomes 18 years of age, and asset control turns to the beneficiary when they reach the age of majority.