Education Planning
Start Funding Your Kids’ Future Today
Earning a college degree remains a strong aspiration, but it comes at a cost. The annual fees are close to $50,000 at private colleges and $22,000 at public colleges respectively.
WestStar Advisors will tell you that the best time to start a college fund is when your child is born. When you factor in compound interest and regular investments, the funds can grow over a longer period of time, and you don’t need to put aside as much each month or year to reach your goal.
We set up tax efficient plans and Education Savings Accounts to give your children the education they deserve without impacting your own retirement.
It’s never too late to start saving for college and enjoy several benefits such as increased flexibility and less debt. Families who save for college may afford a more expensive college than they otherwise could. College savings also can reduce student loan debt, since every dollar you save is a dollar less you’ll have to borrow.
So what’s the smartest way of approaching financial planning for college?
There are various types of college savings plans designed to help you finance your kids or grandkids’ education: 529 Plans and Education Savings Accounts are generally considered better choices because of their tax advantages.
We help to set up tax efficient 529 Plans and Education Savings Accounts to insure your children receive the education they deserve without impacting your own retirement.
To start saving today for college with a plan that suits your goals and circumstances.
Disclosures
Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer’s official statement and should be read carefully before investing.
Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investment in any state’s 529 Plan.
Education Planning Frequently Asked Questions
A 529 Plan is a plan operated by any state or educational institution. 529 plans offer tax advantages and other incentives to make it easier to save for college and other post-secondary training, or for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.
A 529 Plan can be opened for a designated beneficiary, such as a child or grandchild.
There are two types of 529 plans:
Prepaid tuition plans, which allow an individual to prepay a student’s future tuition and fees at today’s rates; and
College savings plans, which allow individuals to contribute to an account established in order to pay a student’s qualified higher education expenses at any eligible educational institution (see above).
When can a 529 plan be opened?
A college savings plan generally can be opened at any time after a child is born.
Most prepaid tuition plans, however, have a set enrollment period established by the state during which new accounts may be opened and these plans have set age limits for the beneficiary.
How to find out more on prepaid tuition and savings plans?
Before selecting either a prepaid tuition plan or a savings plan, you should consider what type of plan best suits your needs. You may obtain copies of its offering documents, which are provided free of charge by the plan and which discuss the plan’s features and benefits in great detail.
A 529 Plan’s earnings are not subject to federal tax and generally not subject to state tax when used for the education expenses of the designated beneficiary. Qualified educational expenses include tuition, fees, books, technical (computer and data) costs, as well as room and board at an eligible education institution.
Contributions to 529 plans are made with after-tax dollars and any earnings grow tax-free at the federal level.
State-tax treatment of college savings plan contributions, earnings, and withdrawals vary from one state to another. A number of states allow residents who participate in their own state’s plan to claim a partial or full state income tax deduction on contributions.
In addition, many states provide residents with a state tax break on earnings distributions from 529 plans that are used to pay qualified college expenses.
What if my child does not pursue a postsecondary education?
In this case, you may request a refund, and the account will be refunded according to the policy of your specific 529 plan. For 529 savings plans, the refund would include any earnings in the account.
Under federal law, there may be income tax consequences including a refund penalty of 10 percent, except in the case of the student’s death, disability, or receipt of a scholarship.
Rather than request a refund, you may choose either to hold the 529 plan investment until a later date when the student may decide to attend college, or transfer the benefits to another member of the student’s family.
Yes, anyone can set up a 529 plan. Generally an account holder can open an account on behalf of any student or potential student. You can set one up and name anyone as a beneficiary — including a relative, friend, or even yourself. There is also no limit to the number of plans you can set up.
For example, grandparents can save on behalf of grandchildren. Even someone who is not a family member can open a 529 plan account for an unrelated child or adult.
Can you open multiple accounts for the same student?
Yes, you can open multiple accounts for the same student / beneficiary, and more than one person can contribute to a college savings plan for the same student / beneficiary.
Is there a limit to contributions for a single beneficiary?
Yes, a state’s maximum contribution limit would limit the total amount that may be invested for a single beneficiary under that state’s program, regardless of how many accounts are held in the beneficiary’s name.
Yes. Contributions cannot exceed the amount necessary to provide for the qualified education expenses of the beneficiary.
Are there tax consequences to a 529 Plan?
If you contribute to a 529 plan, be aware that there may be gift tax consequences if your contributions, plus any other gifts, to a particular beneficiary exceed $14,000 during the year. A number of states allow residents who participate in their own state’s plan to claim a partial or full state income tax deduction on contributions.
For information on rules that apply to contributions to 529 plans, visit https://www.irs.gov/newsroom/529-plans-questions-and-answers
The non-taxable distribution from a 529 plan includes the cost of the purchase of any computer technology, related equipment and/or related services such as Internet access.
These costs will only qualify if they are used by the beneficiary of the plan and the beneficiary’s family during the years the beneficiary is enrolled at an eligible institution such as an elementary or secondary public, private, or religious school.
A designated beneficiary is the student or future student intended to receive benefits. The beneficiary is generally not limited to attending schools in the state that sponsors their 529 plan.
But to be sure, always check with a plan before setting up an account.
Yes, you can. There are no tax consequences if you change the designated beneficiary to another member of the family. Also, any funds distributed from a 529 plan are not taxable if rolled over to another plan for the benefit of the same beneficiary or for the benefit of a member of the beneficiary’s family.
So, for example, you can roll funds from the 529 Plan for one of your children into a sibling’s plan without penalty.
Contributions to 529 plans are made with after-tax dollars and any earnings grow tax-free at the federal level.
State-tax treatment of college savings plan contributions, earnings, and withdrawals vary from one state to another. A number of states allow residents who participate in their own state’s plan to claim a partial or full state income tax deduction on contributions.
In addition, many states provide residents with a state tax break on earnings distributions from 529 plans that are used to pay qualified college expenses. Check with your tax advisor for your state’s tax treatment of contributions to, and earnings distributions from, both in-state and out-of-state 529 plans.
Disclosures
Investors should consider the objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer’s official statement and should be read carefully before investing.
Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from the state’s 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investment in any state’s 529 Plan.