Educational Planning

The challenge of paying for the education of children is second only to that of retirement. There are many ways to fund educational expenses: 529 College Savings Plans [IRS Section #529], Educational Savings Accounts [ESA's], Uniform Gifts / Transfers to Minors [UGMA's / UTMA's], and trusts of various types. Some of these programs are given preferential tax treatment. Accounts are subject to special tax rules that limit income shifting tax advantages, annual contribution limits and total contribution limitations. Gifting to some programs is restricted for higher income parents.

Financial aid calculations attribute assets differently for the various types of accounts. Excise Taxes can be incurred on excessive contributions. Qualifying for the Hope or Lifetime Learning tax credits requires careful use of money from government-sponsored programs. Some transfers allow the control to remain with the individual setting aside the money. Others transfers give the child complete control of the money at age 18.

Trusts can be tailored to achieve any desired result, but are usually subject to substantially higher taxes. All preferential tax benefits come with restrictions and potential tax penalties. Balancing the advantages against the potential cost and complications to determine the optimal combination of vehicles is one of the ways we are of assistance to clients.
 

 Securities offered through Centaurus Financial, Inc., a Registered Broker/Dealer, Member FINRA/SIPC
James O. Davis, Registered Representative [California Insurance License #0712211]