| College Education Planning
“…human capital in the form of creativity and education is the most
important asset in our rapidly expanding global economy…” (Quote from
Jay Helman, president Western State College reviewing The Rise of the
Creative Class by Richard Florida.
It is almost axiomatic that in today’s world a college education is
the competitive edge that separates the “haves” from the “have nots”.
This is something about a college education that makes a significant
difference in the life of the post-secondary school graduate.
But paying for that college education is no easy feat. For many
parents the press of just getting from one end of the month to the other
takes nearly all of the available resources. And yet providing for the
health, education, and welfare of our children is a fundamental
principle embraced by most Americans. So how can parents provide capital
for the development of the “human capital” that is so critical in the
21st Century? It’s like eating an elephant…we take it one bite at a
time!
In 1997 Congress approved the offering of Education IRA (Coverdell
IRA) accounts, and in 2001 Congress crafted legislation that permitted
the tax free accumulation and distribution of money for funding
post-secondary education through what are now known as 529 Pre-paid
Tuition and 529 Savings Plans. Every state in the union offers at least
one 529 plan, and for many parents, this method of saving for college
education has become the preferred choice.
But as one might guess, because there are certain tax advantages
associated with 529 plans, there are layers of complexity that require
the assistance of a qualified 529 specialist to match the appropriate
plan with the unique circumstances and needs of the prospective student.
That assistance will often take the form of identifying 529 plans that
meet the objectives and risk tolerance profile of the student and
his/her family; the completion of the FAFSA application to determine
eligibility for financial aid; the appropriate distribution strategies
to maximize the tax free distributions from a 529 plan relative to the
Hope and Lifetime Learning credits that are available through other
sections of the IRS Code.
In spite of many narrow and restrictive rules that have to be followed
in order for the plan to succeed, there is considerable flexibility
as well. Most state plans allow upwards of $200,000 to be saved
through the 529 plan; anybody can make contributions to the plan
on behalf of the named beneficiary; there are liberal income and
estate tax benefits available through participation in the plan.
Many grandparents and other relatives have found the 529 plan to
be a perfect vehicle to which they can contribute on behalf of grandchildren,
nieces, nephews, etc. for Christmas, birthdays, and other lifemark
celebrations.
Claystar is designated as a 529 Plan specialist, and we are prepared
to “do the legwork” for establishing a college education funding
plan that will work.
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