I hope all is well.  In this edition of News & Views, I will discuss the current state of the U.S. economy and college savings options.  As always, please contact me with any questions or suggestions you may have.

 

529 Plan - is an education savings plan designed to help you set aside funds for future higher education costs.  Money in your account grows tax-deferred and withdrawals for qualified education expenses (tuition, fees, books, room & board) are tax-free.  Your money is invested in the mutual funds or exchange traded funds (ETFs) available in your particular 529 Plan and you are limited to one change or reallocation of your investment mix per calendar year.  529 Plan assets are counted as a parental asset for federal financial aid purposes.

 

UTMA - (Uniform Transfer to Minors Act) is a custodial account set up by an adult on behalf of a minor.  UTMA accounts can be invested in almost anything (stocks, bonds, mutual funds, ETFs, CDs, etc.) and the assets are turned over to the beneficiary when he or she turns 18 (21 in some states).  The first $1,000 of annual earnings is tax-exempt, the next $1,000 of annual earnings is taxed at the child's rate, and any earnings above that are taxed at the adult's rate.  Funds can be withdrawn for the "benefit of the minor" at anytime without penalty.  UTMA assets are counted as a student asset for federal financial aid purposes.

 

Individual or Joint Account - is another option for college savings.  You and/or your spouse can open an account setting aside funds for your child's future.  The funds can be invested in anything you choose.  There are no special tax breaks and there are no restrictions on withdrawals.  The funds are considered parental assets for federal financial aid purposes.

Sincerely,