Funding Higher Education

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By Ed Maass The Pineapple Staff Writer As a parent/grandparent we love our children/grandchildren and thus want to help them succeed the best we can. One way of doing so is planning for and funding the cost of higher education. I have written this column to offer personal insight about a plan (choice) I have made for my grandchildren and why. So, for those of you who are parents or grandparents let’s get started with what I believe is a great way to plan for and fund a college education for your child/grandchild. As a new parent the euphoric feeling of having a baby is the greatest ever, however in what I assure you will be a short 18 years, (may not feel like it sometimes….), but trust me they grow up fast, it will be time for your son or daughter to head off to college. Other than a fully paid scholarship when that time comes what would be better than having an accumulated sum of money that can be used for educational expenses completely Tax free from federal income tax? As a proud grandparent (like me), how great would it make you feel to set aside money in an account for your grandchildren’s college education, yet retain complete and total control of the money and as an added benefit remove the asset (dollar amount) from your estate thus reducing estate taxes? All of this and more can be accomplished through using a 529 plan. This plan is a qualified state-sponsored program for tax- deferred college savings that can be used to pay for education expenses on a tax-free basis at any eligible college, university, or graduate school anywhere in the United States. Qualified expenses include tuition, fees, books, supplies as well as room and board for students living either on or off campus. Furthermore, almost anyone can contribute to a 529 plan – parents, grandparents, aunts, uncles, brothers, sisters and the list goes on. It is important not to confuse the 529 plan with the original state pre-paid college tuition program. They are not one in the same and the differences are significant. Under a 529 plan each individual state selects a professional money management firm to use as the portfolio manager for the assets within that state sponsored plan. You, the investor, then select which state sponsored 529 plan best suits your needs based upon the investment management firm, the underlying investment choices, time horizons and, if relevant, potential state tax implications. For example, those of us living in Florida are not subject to a state income tax. Therefore, this would not be a factor in selecting a 529 plan. However, for those who live in New York, it may certainly be a consideration. Once the 529 plan is established, you can make deposits for as little as $250.00 up to a maximum of $140,000 for a married couple. The actual limits as of this writing are: $14,000 per person ($28,000 for married couples) per year without gift tax consequences, and, if you choose to use a special election, you can accelerate up to five years worth of investments in one-year thereby depositing up to $70,000 per person ($140,000 for married couples). Another great benefit of this plan is if it was set up for one child and that child is smart enough, and/or fortunate enough to get a full scholarship you can then simply change who the plan benefits to another child, grandchild or even yourself. In my opinion, the 529 plan is the smartest way to save and accumulate funds for higher education expenses. If you think that a 529 plan may be beneficial for your children or grandchildren, please do your homework before taking action as there is much to know before parting with your dough. Recommend that you visit: www.savingforcollege.com to learn more. Point to note! A 529 plan is simply a funding vehicle and does not in any way guarantee admission to any specific college or university. Ed Maass is a Certified Financial Planner, Chartered Financial Consultant, and Chartered Life Underwriter. Located in Downtown Delray Beach, you can contact him directly at 561-272-0663, or by email at Ed@physicianswealthcare.com