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EDUCATION PLANNING SERVICES

Prepare for Education Expenses with an Experienced Financial Advisor

With the costs of higher education rising, many parents and guardians of young children are taking action early on to ensure they can afford to send their kids to college. At Financial Consulate, we can advise you on estimated education expenses and help you explore your options for setting up a college fund. By taking a look at your overall financial picture, we’ll be able to determine the impact of your child’s education plan on your long-term finances.

For more information about education planning from Financial Consulate, please call us today. You can reach our Hunt Valley, MD office at 410-823-7283 and our Gettysburg, PA location at 717-334-1861.

Education Savings Accounts (ESAs)

Custodial accounts under the Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) allow you to create a college fund for your child. Individuals can establish ESAs on behalf of their children through a bank or broker, eliminating the need to work with an attorney to create a special trust fund. Family and friends can contribute to the fund with no limits, and the custodian can use the funds to purchase securities on behalf of the minor.

529 College Plans

Also called Qualified Tuition Programs, 529 plans are available in every state. As with ESAs, contributions to a 529 plan aren’t tax-free, but the earnings on the plan’s investments are if used for qualified education expenses. The two types of 529 plans include:

  • Prepaid tuition plans that cover costs at participating universities
  • College savings plans/investment accounts that students can withdraw from to pay expenses at educational institutions

2503© Trusts

This type of minor’s trust is designed for beneficiaries under the age of 21. Donors can make tax-free contributions up to the annual gift tax exclusion amount. The beneficiary often has a narrow window around age 21 to withdraw the balance of the trust. Due to the complexity of 2503(c) trusts, you will most likely need the guidance of an attorney to ensure compliance with all the rules.

Other Investment Products

There are rules about higher-income families participating in tax-advantaged college fund programs. Even if you don’t qualify, you may wish to pursue other investment products to help you plan for your child’s future. Financial Consulate will help you explore your options so you can make the proper economic decisions to fit your situation.

529 Plan FAQs

There are many 529 plans to consider, and you will want to examine the in-state tax benefits, fees, and expenses associated with each. As with all financial products, it is imperative to understand how the plan is administered and how the plan has performed over the past 3-, 5-, and 10-year performance periods. There are many fantastic plans available in Maryland, Washington, DC, Pennsylvania, and Virginia that our team can help you review.

The rules that govern 529 plans allow individuals to roll over their 529 accounts into accounts in another state. When you move, federal tax laws allow you to move these accounts once during a 12-month period. This means that you can move the account with ease and with no worries about it impacting your tax bill.

Each state has different rules for the maximum annual contribution. As a general rule, the maximum is the anticipated cost of your child’s higher education expenses. You can “superfund” your account with up to five years of your federal gift tax exclusion; however, anything beyond this will count against your lifetime gift tax exclusion.

Funds in a 529 account can be used to cover tuition, fees, and other education-related expenses. They can be applied at a standard four-year university, two-year college, trade school, culinary institute, etc. The Tax Cuts and Jobs Act extended the options available and parents can now use these funds for primary and secondary educational expenses.

It’s hard to see 10, 15, or 18 years into the future. When the time comes, there are options available if your child chooses not to attend college. You can take a nonqualified withdrawal, which means that you’ll pay a 10% federal penalty plus taxes owed on any interest earned on the account. You can also change the beneficiary on the account. However, the beneficiary must be an eligible family member to avoid income taxes and the federal penalty. Eligible family members include brothers/sisters, stepbrothers/stepsisters, spouses, aunts, uncles, and cousins.

Have a Question?

Call Financial Consulate for Education Planning Services

When it comes to helping you make wise investment decisions for your child’s future, the Financial Consulate is here to assist you. Our team is comprised of highly educated, certified financial experts with years of experience to draw from. We are a true fiduciary with fee-only services that ensure no conflicts of interest get in the way of providing you with professional financial advice.

Education planning is just one of the many financial management services we offer. Whether you’re starting a family, building your career, or approaching retirement, our experts can help you.

To team up with an experienced education planning firm in the Mid-Atlantic, please contact Financial Consulate today. We have offices in Maryland and Pennsylvania and serve the surrounding areas of Virginia, Washington, DC, and Delaware.

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