It’s About Her. Him. Them.
Why is it so hard to start the conversation about a college fund? Parents tell us they would love for the family to help. Grandparents say they’re waiting for their kids to ask. Extended family and friends have no idea what to do or how to do it. Somebody needs to take the reins here, and like most important things, it probably needs to be the family leader. You!
“We were thinking about (insert child’s name) future...”
It’s as simple as that statement. From there, your kids will breathe a sigh of relief and the conversation will flow easily. So use this website to get up to speed on 529 plans and why it’s the core of any serious college-funding strategy. You can start with this section, but be sure to go back to the home page for all the basics.
College Grads Earn More
*Note: Data are for persons age 25 and over. Earnings are for full-time and salary workers. Based on weekly wage. Source: U.S. Bureau of Labor Statistics, Current Population Study, 2015
Ohio gift-givers get a tax break.
If you’re an Ohio resident giving to a CollegeAdvantage 529 account, you can deduct up to $4,000 per year, per child or grandchild, from your Ohio taxes. That’s not a contribution cap, and for larger gifts you can carry the deduction forward into future years.
Owning the account vs. contributing to an existing account.
While this is a personal decision, it’s not quite as simple as it seems, as the world of college financial aid is very complex. Currently, accounts owned by the parent(s) have very little effect on financial aid.
Owning The Account
If you choose to own the account, you have to be willing to stay actively involved in managing the funds and making investment choices. As college approaches, you may want to consider working with the parents or a tax advisor on tactics to avoid negatively affecting the child’s future grants and aid.
Open An Account
Contributing To The Account
When you contribute to an existing account, it’s a very simple process. You give as little or as much as you want (within legal limits) right from our website or via check. The Account Owner can provide you a UGift code to contribute online.
Contribute To An Account
Whoever owns the account also decides who ultimately uses the funds. For instance, if the designated child decides not to go to college, the account owner can redistribute the funds to other children, or perhaps adult children pursuing continuing education, or use the funds themselves. The owner can even withdraw the funds and pay taxes, and a 10% penalty, but only on the earnings.
While most people choose to let the parents be the account owner and simply have an open, honest conversation about their wishes, the option to is entirely in the gift-giver’s hands.
Making a very large gift.
Currently, you can give up to $15,000 as an individual and $30,000 as a married couple to each child annually without triggering a federal gift tax. But let’s say you want to really jump-start the college fund and take maximum advantage of tax-free compounding. Single filers can make a one-time $75,000 contribution and married couples can give $150,000 per child. Talk with your tax advisor if this strategy is appealing.
Aren’t there other ways to save?
Traditional bank and investment accounts can work, but they’re taxed every year which reduces your total savings. With Ohio’s 529 Plan, you’ll find dozens of highly regarded, low-cost mutual fund investments as well as FDIC-insured bank products. Direct gifts through UTMA or UGMA accounts are another way to go, but the child owns those accounts once they turn 18.