Paying For Your Child's College
Parents interested in planning for their children’s college education have many options to choose from. They need to carefully weigh each of these options to choose the one that best fits their needs and their children’s future financial goals.
Look at Various State Funding Options
Various states offer college savings plan options, and parents need to consider these. Factors to look at include the flexibility of the plan, tax benefits and potential penalties, rules for contribution, selection of investments, and the costs and fees of the plan.
Consider Account Ownership and Beneficiaries
When you look at various college savings plans, always consider the flexibility of the plan, especially as it relates to ownership and the designated beneficiary. Each state has different rules, and you want to make sure the account works the way you need it to, because college savings represent a sizeable investment.
WHEN INQUIRING ABOUT AN ACCOUNT, ASK QUESTIONS SUCH AS:
- Can my spouse and I own the account jointly?
- Can I name someone as the successor owner? If not, what happens to the account if the named owner passes away?
- Can a trust or similar entity be the owner of the account?
- Do I have to reside in the state to open an account? Does the beneficiary have to reside in the state? What happens if the beneficiary moves out of the state?
- Does the beneficiary receive the account statements or only the owner?
- How much of my contributions or any earnings will I receive if I terminate the account? Are there any penalties for account termination?
- Are accounts available to view online?
RULES FOR CONTRIBUTIONS
Your money and the way in which you use it is important to you. You want to ensure that the college fund you use matches your means and your goals. Because of this, ask questions about the contributions rules of each plan you are considering. Here are some questions you should ask:
- What is the maximum amount I can contribute to the plan?
- How much do I need to establish the plan?
- Does the plan require annual contributions, and if so, how much are they?
- Can someone besides me or any other named account owners make contributions?
- Do these rules change if I am a resident of the state or a nonresident?
The answers to these questions will help you determine whether or not a particularly plan fits your financial abilities. Contact us to learn more about planning for your children’s future education needs.