Education Planning : Helping You Invest in Your Loved One’s Future

We help you know your options when it comes to providing for the future needs of your children and grandchildren.

One of the most rewarding aspects of your success is being able to support your child or grandchild’s education. With rising inflation and the high cost of education, planning to contribute to another’s education can be a challenge.

The number of education savings plans available and the stipulations of each can be daunting, that’s why we review the pros and cons of each and determine which plan fits with your unique financial planning strategy. From education savings accounts to gift to minor accounts to 529 plans, our experienced financial advisors will guide you to an education savings strategy that makes sense for your family – and help you plan for your child’s or grandchild’s success.

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Establish a Coverdell Education Savings Account (ESA) 

Contribute up to $2,000 per year to a Coverdell ESA established for a child or grandchild. This tax-advantaged savings vehicle lets you save money for the qualified education expenses of a named beneficiary, such as a child or grandchild. Qualified education expenses include college expenses and certain elementary and secondary school expenses. The donor to the ESA must meet the modified adjusted gross income limits.

Consider a Gift to Minor Account (referred to as Uniform Transfers to Minors Act [UTMA]) 

UTMA accounts are a simple way for a minor to own securities without requiring the services of an attorney to prepare trust documents or the court appointment of a trustee or guardian. Contributions can be made by anyone to UTMA accounts, which are usually established by a parent. There may be other lifetime expenses related to education or other needs that are not eligible to be paid by an ESA or 529 plan. Therefore, establishing a UTMA account could meet those additional needs.

 Contribute to a 529 Plan Account

A 529 Plan may be established by a parent, but anyone can contribute. This education savings plan is designed to help set aside funds for future education costs. Also, up to $10,000 a year can be used for elementary and secondary tuition (but not other qualified education expenses). Named after Section 529 of the Internal Revenue Code, contributions to the 529 plan are treated as a gift to the beneficiary and are subject to gift tax annual exclusion limits. It is possible to “pre-use” up to five years of the annual exclusion amount for a gift to a 529 Plan. Some states may allow an income tax deduction for 529 contributions.

Cost of education College

Establish a Gift Trust

Families that have more complex situations may want to have an attorney draft a gift trust. The trust can continue beyond age 21 for the child’s benefit and be used for a wide variety of needs. Income is taxable to the trust and/or beneficiary.

ABLE Account for Children with a Disability

ABLE Accounts, which are tax-advantaged savings accounts for individuals with disabilities and their families, can be created as a result of the passage of the Achieving a Better Life Experience Act of 2014, or better known as the ABLE Act. The beneficiary of the account is the account owner, and income earned by the accounts, will not be taxed. Contributions to the account made by any person (the account beneficiary, family and friends) will be made using post-taxed dollars and will not be tax deductible, although some states may allow for state income tax deductions for contributions made to an ABLE account.

A “qualified disability expense” means any expense related to the designated beneficiary as a result of living a life with disabilities. These may include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management, administrative services, and other expenses which help improve health, independence, and quality of life.

child with special needs,

Direct Payment of Medical and Tuition Expenses

The gift tax rules under IRS Section 2503(e)(2) exclude gift payments of tuition made directly to an educational organization or directly to any person or organization who provides medical care for the benefit of another person such as a child or grandchild.

FCA Corp can help you coordinate these payments as part of your overall financial plan.

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