Not Your Average 529 Plan - Retirement and Estate Planning, Part 2

While 529 plans are commonly used for education savings, they can also be used for tax-efficient estate transfer. This can be done through a process called forward gifting or superfunding. This process takes advantage of a unique provision in Section 529 of the IRS Code that allows people to gift five years' worth of contributions in the present year without incurring a gift tax consequence. If you remember from Part 1, the IRS allows for an annual gift of up to $15,000 per recipient for individuals ($30,000 for married couples) annually without gift-tax consequences (as of 2018).

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Dana CaroComment
Mastering Financial Aid Eligibility

For many families, financial aid programs help make higher education attainable. The first step in applying for aid is to complete the Free Application for Federal Student Aid (FAFSA). It is used to determine the student’s eligibility for federal aid programs, such as grants, work-study options, and loans. Schools also use the FAFSA to assess whether additional aid is available from an applicant’s state of residence and from the school itself.

 

The FAFSA’s more than 100 questions ask for a host of personal information, including marital and citizenship status, tax- and income-related information, household size, and the schools the student will apply to. It also asks for details about the income, assets, and education history of the applicant’s parents.

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Not Your Average 529 Plan - Education Planning, Part 1

So, let’s start with a refresher. What is a 529 college savings plan (spoiler alert: no longer just college)? 

A 529 plan is a tax-deferred account with contributions invested in a selection of mutual funds or exchange-traded funds. Later, those assets can be withdrawn tax free if used for qualified expenses. These contributions are not deductible on your federal tax return, but many states offer a state tax deduction for contributions made to 529 plans. And yes, Pennsylvania is one of those states!

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Dana CaroComment
Important Legal Documents for College Students

As summer turns to fall, flocks of recent high school graduates leave the nest and head off to college or university for the first time. Their parents are faced with a wide range of emotions as they watch their children prepare to spread their wings as independent young adults.

 Until the students demonstrate sufficient maturity and decision-making skills, many parents continue to take an active role in their children’s lives. But once a child reaches the age of 18, he or she has all the legal rights of an adult. This means that the individual is legally on his or her own should a health, financial, or legal matter arise.

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