Maximizing Opportunities: College Saving Strategies

Maximizing Opportunities: College Saving Strategies

It is never too early to begin planning for the ever increasing cost of a college education. Some options are relatively straightforward and others, more complicated. Some offer more tax benefits, while others bring more flexibility. In all situations, it makes good sense to consult your financial advisor to gain a clear understanding of the options available — and their pros and cons — before making a decision.

Below are the advantages of the most popular college savings plans including some enhancements since the passage of the 2017 tax bill:


529 plans 

Parents and grandparents alike can contribute to 529 plans. These accounts are funded with after-tax dollars and grow tax free. Qualified distributions are not taxable. Some states offer tax deductions or credits that can be used on a 529 contributor’s state tax return.  529 plans also allow the owner to change the beneficiary designations to other members of the extended family.

Some additional benefits:

  • Up to five years’ worth of annual exclusion gifting — $75,000 per individual or $150,000 per couple — may be “frontloaded” into the plans, providing for significant compounding benefits; and
  • Under the 2017 tax legislation, up to $10,000 per 529 beneficiary can be used for K-12 tuition costs.


Despite the additional costs, a trust may be a good option for parents and grandparents with larger estates who are concerned about estate taxes. They can use the gift exclusion to make gifts to a trust AND pay tuition directly when due. Tuition is not subject to gift tax. Income earned in trust is taxable on a current basis.

Some of the benefits include:

  • Flexibility in investment choices;
  • Flexibility in how trust funds are used (not limited to education expenses); and
  • Ability to leave account balance in the trust upon completion of education.

Uniform Transfers to Minors Accounts

These accounts are often used for college savings and must terminate by the time the beneficiary reaches age 21. Beneficiaries cannot be changed. Income earned is taxable on a current basis.

Some of the benefits include:

  • No trust document needed; and
  • Assets can be used for other expenses as long as the money spent benefits the child.

Need help discovering the right college savings plan for your family? Let’s talk.

Everything we do starts with a conversation. Understanding your unique story is key in the development of a plan with your best interests in mind. Connect with us to learn more.




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