by Bryan McCrea
A 529 Education Savings Plan is a flexible, state-sponsored savings vehicle that is often used by parents and grandparents interested in providing education funding.
We help clients set up 529 savings plans, typically to be used to cover qualified college/post-secondary expenses. We also advise on the use of UTMA (Uniform Transfers to Minors Act) accounts, which have fewer tax benefits but more investment options, yet often don't stack up to those of a 529 plan when it comes to education savings. For example:
A) Earnings in a 529 plan grow free from federal income taxes, and are free from federal income taxes when withdrawn for:
B) Earnings in a UTMA are taxed at the parent's or the minor's rate, and the child takes control of the account at age 18. The parent ultimately controls the assets in a 529.
The value of working with your advisor at Legacy Financial
We can hold both 529 plans and UTMAs here in your account. This means we can keep a closer eye on these accounts, and will be able to adjust the investments more quickly to changing market conditions. We also have more control to reduce risk in the portfolio/account as the child approaches the time to withdraw funds from a 529 or UTMA account.
If you're ready to invest in a child's education, but need help figuring out which type of funding to set up, how to invest, where the tax advantages lie, or any other planning question, call us or email us.
by TC Falkner, CFP ®
With the rising costs of tuition, housing, and other expenses, avoiding student debt is increasingly challenging, making planning for your child’s education even more important. According to the Education Data Initiative, the average cost of education is expensive and growing yearly.
This is why planning for your children's education is important. There are many ways to successfully save for college, and starting early can make a significant difference. Let’s take an example*:
There are also several variables to consider. Some clients choose to help with tuition only. Others want to save in lump sums yearly instead of monthly. There are 529s, UTMAs and self-funding options. If you're ready to invest in a child's education, but need help figuring out which type of funding to set up, how to invest, where the tax advantages lie, or any other planning questio
*This is a hypothetical scenario meant for educational purposes only. Actual results may vary widely.
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