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Is This Your Situation: Concerned About Funding Your Child’s Higher Education

 

Saving for your child’s education is no easy task. Although it is ideal to begin a savings program when your children are born, some families don’t start saving until their children are older. One of the best options is a 529 plan. With this plan, you can put away funds and avoid being caught off guard when college enrollment comes around. Following are answers to some of the most pressing questions about 529 plans.

How does the 529 plan work? 

In general, these plans allow for individuals to buy credits that can pay for future tuition and, on occasion, other college expenses. Some states may have residency requirements, and you’ll need to select a participating college or university. These prepaid plans can lock in tuition prices, establish payments based on your child’s age, and establish a grade limit for your student.

Can you get tax breaks?

Yes, 529 plans are exempt from federal taxes, as well as some state taxes. But this is only the case if you use the funds for education expenses.

Are there fees?

No, but there are some exceptions. You can avoid fees in a variety of ways, so it’s best to consult an expert when making a decision on a 529 savings plan.

What about inheritance?

If the owner of the plan passes away before the money is utilized for a college education, it can transition to the successor named on the application. Always select someone you trust to manage your estate.

What if they don’t go to college?

Of course, as much as we plan ahead for our child’s future, there is no way to know what direction your child might want to go in life. You can change the beneficiary, so the money still is used for its intended purpose. Alternately, you can withdraw the money, but you may be subject to penalties.

Because each state may have a slightly different plan, it’s highly recommended that you seek professional advice when deciding on a 529 plan. If you have more questions about saving for your child’s college education, contact us today.

 
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Kim & Lee
Kim & Lee, LLP
info@kimleecpas.com
2305 W. 190th St. Suite 100
Torrance, CA 90504
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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