Recent Posts

College Funding Options

How can you cover your child’s future college costs? Saving early (and often) may be key for most families. Here are some college savings vehicles to consider.


529 College Savings Plans

Offered by states and some educational institutions, these plans allow you to save up to $15,000 per year for your child’s college costs without having to file an I.R.S. gift tax return. A married couple can contribute up to $30,000 per year. (An individual or couple’s annual contribution to a 529 plan cannot exceed the yearly gift tax exclusion set by the Internal Revenue Service.) You can even front-load a 529 plan with up to $75,000 in initial contributions per plan beneficiary – up to five years of gifts in one year – without triggering gift taxes.. (1,2)

529 plans commonly feature equity investment options that you may use to try and grow your college savings. You can even participate in 529 plans offered by other states, which may be advantageous if your student wants to go to college in another part of the country. More than 30 states offer some form of a tax deduction for 529 plan contributions. (1,2)


Earnings from 529 plans are exempt from federal tax and generally exempt from state tax when withdrawn, so long as they are used to pay for qualified education expenses of the plan beneficiary. If your child doesn’t want to go to college, you can change the beneficiary to another child in your family. You can even roll over distributions from a 529 plan into another 529 plan established for the same beneficiary (or another family member) without tax consequences. (1)


Grandparents can start a 529 plan (or other college savings vehicle) just like parents can. In fact, anyone can set up a 529 plan on behalf of anyone. You can even establish one for yourself. (1)


These plans now have greater flexibility. Thanks to the federal tax reforms passed in 2017, up to $10,000 of 529 plan funds per year may now be used to pay qualified K-12 tuition costs. (2,3)


Coverdell ESAs

Single filers with modified adjusted gross incomes (MAGIs) of $95,000 or less and joint filers with MAGIs of $190,000 or less can pour up to $2,000 into these accounts annually, which typically offer more investment options than 529 plans. (Phaseouts apply above those MAGI levels.) Money saved and invested in a Coverdell ESA can be used for college or K-12 education expenses. (3)


Contributions to Coverdell ESAs aren’t tax deductible, but the accounts enjoy tax-deferred growth, and withdrawals are tax free, so long as they are used for qualified education expenses. Contributions may be made until the account beneficiary turns 18. The money must be withdrawn when the beneficiary turns 30, or taxes and penalties will occur. Money from a Coverdell ESA may even be rolled over into a 529 plan. (3,4)


UGMA & UTMA Accounts

These all-purpose savings and investment accounts are often used to save for college. They take the form of a trust. When you put money in the trust, you are making an irrevocable gift to your child. You manage the trust assets until your child reaches the age when the trust terminates (i.e., adulthood). At that point, your child can use the UGMA or UTMA funds to pay for college; however, once that age is reached, your child can also use the money to pay for anything else. (5)


Whole Life Insurance

If you have a permanent life insurance policy with cash value, you can take a loan from (or even cash out of) the policy to meet college costs. Should you fail to repay the loan balance, obviously, the policy’s death benefit will be lower. (6,7)


Did you know that the value of a life insurance policy is not factored into a student’s financial aid calculation? If only that were true for college savings funds. (6)


Imagine your child graduating from college, debt free. With the right kind of college planning, that may happen. Talk to a financial professional today about these savings methods and others.




Citations

1 - IRS.gov, May 28, 2020

2 - CNBC.com, May 29, 2020

3 - forbes.com, September 9, 2019

4 - IRS.gov, May 28, 2020

5 - Finaid.org, May 28, 2020

6 - FinancialResidency.com, July 20, 2019

7 - FA-mag.com, September 24, 2019

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Financial Plan | Personalized Report | Financial Advisor - Minneapolis

Barrington's Financial Blog

INVESTMENT RISK SCORE.png

 About    |    Our Services    |    Financial Planning    |    Employer Retirement Plans    |    Contact

Litigation Support    |    Expert Witness    |    Pro Bono Services    |    Careers       

Barrington Capital Management, Inc.  |  3800 American Boulevard West  |  Suite 1110  |  Bloomington, MN  55431

952-835-1000   800-944-2419  |   Fax: 952-835-1504  |  Info@BarringtonCap.com

 

Barrington Capital Management, Inc. only conducts business in states and jurisdictions where it is registered or where an exemption from registration exists. This site and its contents do not constitute investment advice or a solicitation to sell securities. Past performance is not indicative of future results. This website is for informational purposes only and Barrington Capital Management, Inc. reserves the right to modify it at any time without notice. Copies of Barrington Capital Management Inc.’s Form ADV Part 2 are available upon request. Images and photographs are included for the sole purpose of visually enhancing the website. No photographs are of current or former clients and they should not be construed as an endorsement or testimonial from any of the persons in the photograph.

All materials used on this site, including all images, are copyrighted and are protected worldwide by copyright laws and treaty provisions. They may not be copied, reproduced, modified, published, uploaded, posted, transmitted, or distributed in any way, without Barrington Capital Management Inc.'s prior written permission.

Neither Barrington Capital Management, Inc., nor any of their Investment Adviser Representatives, provide tax or legal advice. Tax and legal advice should only be obtained from a qualified professional. All written content on this site is for informational purposes only. All information and ideas should be discussed in detail with an advisor prior to implementation. Examples from our news feeds, blogs or articles do not take into consideration commissions, investment management fees, miscellaneous transaction fees, tax considerations, or margin requirements, which are factors that may significantly affect the economic consequences of a given strategy. Investors should review transaction costs, margin requirements and tax considerations with their financial or tax advisor before entering into any investment or financial planning strategy. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness.

Investment Advisory services are offered by Barrington Capital Management, Inc., a Registered Investment Adviser in the states of Minnesota and Texas. Barrington Capital Management, Inc. may utilize the services of First Ascent Asset Management, LLC for certain investment portfolios. Insurance products and services are also offered through Barrington Capital Management, Inc. 

 

Disclosure: Barrington Capital Management, Inc. is not a law firm. Robert D. Lawson and his associates are not practicing attorneys. The scope of any activities performed by Robert D. Lawson, subcontractors or employees of Barrington Capital Management, Inc. is limited to litigation consulting and litigation support.​

By using this website, you agree to our Terms of Service and Privacy Policy.

Business Continuity Plan

Copyright © 2020 Barrington Capital Management, Inc.  |  A Registered Investment Adviser  |  All Rights Reserved