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The Deadline is Around the Corner!

The Deadline is Around the Corner!

April 23, 2021

With the April 30th deadline around the corner, creating your child or grandchild's 529 plan is an easy way to help them to get a great start in life. Over the last four decades, the price of a college education has grown disproportionately to other costs. Inflation set aside, college cost has more than doubled since the 1960's and college costs have gone up by more than 50% for public and private non-profit institutions in just the last 20 years.1 It’s no wonder Americans owe $1.5 trillion in student debt.2

Clearly, saving early and wisely has never been more important.

If you'd like to learn more about how to plan for your child or grandchild's education, please reach out!

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Here are a few avenues to consider:

529 Plan: This qualified tuition plan was created to allow families to save money for future education without paying federal taxes on its growth – as long as it is used for qualified higher-education expenses. (The Tax Cuts and Jobs Act now allows families to use funds toward a private elementary or secondary education as well.) If the original beneficiary doesn’t need the funds for education, the beneficiary can be changed to another family member. Balances can’t exceed the beneficiary’s expected educational expenses. Many states offer a tax credit or deduction for contributions, often limited to their own state’s plan.

There are two types of 529 Plans. A 529 Prepaid Tuition Plan locks in the current price for a block of tuition at a specified list of schools. With the more flexible and popular Education Savings Plan, funds go into an investment account.

UGMA/UTMA Account:Adults can easily make irrevocable gifts to a minor with these custodial accounts. Earnings are usually taxed at the child’s lower rate. The beneficiary must be given control of the account when they turn 18 to 25, depending on the state. Since the child owns the account, the assets may impact the student’s financial aid.

Coverdell Education Savings Account:Like 529 Plans, contributions are not deductible and distributions aren’t taxed. However, these plans are more restricted as individuals or couples who wish to open an account must meet income guidelines, and annual contributions cannot total more than $2,000 per beneficiary from all contributors.

This brief overview doesn’t cover all the rules and considerations of these accounts or other options.

Please seat aside a few minutes to talk with me about your best next steps.



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