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Strategies & Market Trends : College Savings Plans and Strategies -- Ignore unavailable to you. Want to Upgrade?

To: Original Mad Dog who wrote (3)	3/24/2002 11:41:31 PM
From: HG	Respond to of 19

-edit Sorry I meant to post on the PTT thread..

To: Original Mad Dog who wrote (3)	3/25/2002 3:49:05 PM
From: Original Mad Dog	Read Replies (1) \| Respond to of 19

From an article last Fall: Tackling questions about college savings and IRAs By LYNN ASINOF Q: I have questions about setting aside funds for my grandchildren's education. Should IRAs be opened? If so, in whose name and what beneficiary? How about accounts in trust for when they are ready for college? This whole area is very confusing. I don't have spare cash now to open accounts for my seven grandsons. The oldest is 14 and the youngest is two years old. Peter Gibson Cypress, Calif. A: A big initial deposit isn't a prerequisite to helping fund your grandkids' college education. Often, the simple act of opening an account can have a bigger impact than you might realize, particularly if the grandchildren are young and have many years to watch their accounts grow. The key is picking an investment vehicle that offers both the opportunity for growth and the flexibility your family might need. And the decision about where to open that account just got a lot simpler, thanks to the new federal tax law. Starting in 2002, withdrawals from state college-tuition savings plans, known as 529 plans, will become tax-free -- provided the money is spent on qualified educational expenses. Also effective next year, the amount that can be contributed annually to a child's Coverdell Education Savings Account will be boosted to $2,000 from the current $500. Formerly called an education IRA, the ESA or Coverdell also is tax-free if withdrawals are used to pay school-related expenses. As such, both vehicles have become extremely attractive choices for people now trying to decide where to tuck future tuition dollars. Which one is better? That depends on your particular needs. Yet Joseph F. Hurley, founder of Savingforcollege.com (savingforcollege.com), which provides education and information on 529 plans, says these state-sponsored college saving plans offer a combination of tax savings and flexibility that is hard to beat. These state plans allow you to deposit money in a variety of broad-based investment accounts. For estate-planning purposes, any money contributed is considered out of your estate, yet as the donor you control how the money is distributed. You can, for example, open a 529 account for one grandson, and if he doesn't go to college, you can name another grandson as beneficiary. Or if you found you had given away more money than you could afford, you could even take the money back for yourself, although you'd have to pay taxes on any gains and a penalty. To date, 37 states have college-savings plans. Each state's plan has its own rules and investment options. "Look to your own state program first," says Mr. Hurley, noting that some states offer hefty tax breaks to their own residents, ranging from deductible contributions to the elimination of state income tax on withdrawals. Other things to consider: the ease of changing beneficiaries, the range of investment options, account fees and even the minimum account size.