COLLEGE FUNDS:  ACCUMMULATION – DISTRIBUTION – TAXATION

BY:  Mary Recor, CPA

 

 

The thought of attending college brings about a kaleidoscope of emotions:  excitement, learning, adventures well as expense. There are many thoughts that come to the minds of both parents and students when it comes to the task of dealing with college expense.  The focus of this paper is to examine the options available to handle or deal with this process. It will examine different vehicles available to assist in the accumulation of funds such as 529 Plans, both private and public plans. In addition, custodial accounts and trusts will be examined.  Also, a discussion regarding 529 Plan contribution limitations on an annual basis and the total accumulation limitation will be reviewed. Also, financial aid possibilities will be analyzed.  Different saving approaches impact financial aid in a different manner.  Both assets and income of both parents and students must be considered. These concepts will be developed by considering tax strategies and techniques such as current gifting and the 5 year approach. New developments brought about by The Tax Cuts & Job Creation Act has impacted Educational Savings and will be discussed. By using the method of comparison concerning the different vehicles, the tax consequences and the financial aid impact, one will be able to make the best choice.  Parents, students, and grandparents too, can be better prepared.