HIMPower Magazine HimPower December 2017 | Page 17

529, and you may find that there are some
state plans you like better than your own.
So you’ll want to do some research before
signing up. SavingforCollege.com is a good
place to start.
You might also consider a 529 college
prepaid plan. The advantage is that you can
buy tuition credits at a college in your state
at current tuition rat es instead of waiting,
say, 18 years and paying what college will
cost then. The downside is that your child
may not want to go to the school you've
chosen. You can get your money back, but
the money you invested may not have grown
much. old cash that you'd like to reserve especially
for your kids, you can put them in one of
these custodial accounts. (UTMA stands
for the Uniform Transfer to Minors Act;
UGMA, the Uniform Gift to Minors Act.)
The downside is that when it comes to finan-
cial aid, your college will consider this when
deciding how much to give your child. So
if you have a lot of money in one of these
accounts, the school may not give you
much. On the other hand, if you have a lot
of money in one of these accounts, you may
not need financial aid all that much. Still,
before opening a UTMA or UGMA, it's best
to discuss it with a financial advisor.
INVEST DIRECTLY IN MUTUAL FUNDS
While 529 plans are designed specifi-
cally for college savings, they generally only
offer four or five investment choices. These
investment choices are in and of themselves
limited. By investing in mutual funds, you
have the opportunity of earning higher
returns, with greater diversity and by using
the student’s tax id number for taxation,
they would have to earn greater than $1,050
in non earned income before taxes would be
due, and then it would be taxed at a rate of
about ten percent, (given the 2016 IRS tax
tables). Your portfolio would have to have
significant gains to have a burdensome tax
liability. COVERDELL EDUCATION SAVINGS
ACCOUNT
This is another type of trust or custo-
dial account that’s specifically for a child's
college education. The main downside is
that you can't put more than $2,000 a year
into one or multiple ESAs. So if you open
a Coverdell ESA for your child and your
father does, too, you could put $1,000 in
and he could contribute the same, but then
you're done. Of course, if you're fighting to
sock away $200 a year, this may not bother
you. Still, limitations like this are why 529s
have become so popular. But 529s do have
maximum lifetime contributions ranging
from approximately $200,000 to $400,000,
depending on the state.
UTMA AND UGMA ACCOUNTS
These custodial accounts act as a trust
for your child. In other words, if you have
assets like stocks, bonds, annuities or plain
GET YOUR CHILD TO PITCH IN
If you have a four-year-old, you're out of
luck, but if your 14-year-old is baby-sitting,
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