Show #255 Airing: Sunday, May 9, 2004
Trying to pay for your child’s or grandchild’s 3R’s: readin’, (w)ritin’, and ‘rithmetic? Well, today it’s a lot more complicated than 2 plus 2 equals 4. The costs for gettin’ smart keep going higher. Here to talk about a smart way you can fund your youngster’s higher education is our highly intelligent financial expert, Jim Lineweaver. Jim is founder of the Lineweaver Financial Group.
Question: There are several ways to help fund your child, grandchild, or niece or nephews. Today we are going to look at 529 plans. Can you explain what those are?
Answer: A 529 Plan provides a tax-advantaged college savings option. You pay no taxes while your account accumulates. When it’s time to use the account for collage, your earnings are tax-free: withdrawals used for qualified higher education expenses are exempt from federal income tax, provided the recipient is not claiming any other education tax incentive.
Question: What are some of the advantages of saving using a 529 Plan?
Answer: Besides the tax benefits I just explained, 529 plans allow YOU to remain in control, regardless of the age of the student for whom you are saving the money. And if the child decides not to attend college, you can defer use of the account, change beneficiaries or withdraw the funds. Plus, you can change your investment options once each calendar year.
There are also estate-planning benefits. Parents or grandparents gifting to family members may receive an immediate benefit in reducing the donor’s gross taxable estate. For example, you can contribute, in the first year of a 5-year period, up to $55,000 per child ($110,000 if you elect to split the gift with your spouse) gift-tax free as long as there are no other gifts made to the child in the same five-year period.
And if you choose to invest in Ohio’s 529 plan, Ohio residents can deduct their contributions from state of Ohio taxable income.
Question: Does your child have to go to an Ohio college or university?
Answer: If you have chosen one of the variable investment options of the 529 plans, they can be used at any college or university in the country.
There was an option called a Guaranteed Savings Fund that allowed investors to buy “tuition units” for specifically any of the 13, 4-year Ohio public universities. However, new enrollments in these funds were temporarily suspended in 2003.
A 529 Plan can be an excellent plan to fund a child’s or grandchild’s college costs. And with the recent change, Ohio’s program has just gotten better. But there are other options for college savings planning, too. We’ll get Jim back to talk about those, and you should “plan” to join us.
Jim Lineweaver is a registered representative of and offers securities through Walnut Street Securities, Inc. (WSS) Member NASD/SIPC.
Branch Office:
9050 Sweet Valley Drive,
Valley View, OH 44125
216-520-1711
WSS does not offer tax or legal advice.
Lineweaver Financial Group is not a subsidiary or affiliate of WSS.
Material discussed is for information purposes only and should not be the basis for any investment decisions.
