Part of being an informed consumer of a college education is understanding some of the tax implications of certain situations in our lives. This is of particular interest to families
Higher income families that attend the high school financial aid night often walk away with nothing but frustration and feeling like it was a waste of time. The reality is that high-income earners and many business owners will probably not be eligible for financial aid when their child is ready for college. Here is the good news, once you know that you are not going to receive need-based aid you can shift your focus to other strategies to cut your college cost.
Before the existence of 529 plans, there was the UTMA, Uniform Transfers to Minors Act. Parents and grandparents could create UTMA accounts in their child’s name, put money in them, and not only save for college (or something else) but also avoid paying the higher tax percentages of the parent. A perfect tax shelter…your children! In the 80’s, the government got wise and passed “kiddie tax” laws to remove this shelter loophole. As a result, UTMA accounts have tax implications you need to consider when choosing this savings product.
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Capstone Wealth Partners is a fee-only independent Registered Investment Advisor in Columbus, Ohio. We are financial planners for college-bound families.
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