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Financial Planning / Paying For College

URL:  https://boards.fool.com/gary-there-is-a-question-relating-to-quotother-15432419.aspx

Subject:  Re: Parent vs Child Assets Date:  7/24/2001  11:44 AM
Author:  japper Number:  4078 of 8558

Gary,
there is a question relating to "other income" which is where any gifts should be shown. Also, if your child gifts then it will trigger a change in assets because he will either give shares of a security or actual cash after selling a security/fund. The sale of course will be income and generate gains taxes for the child even when the proceeds are given to someone else.

AS to your question of whether the account falls to UGMA or UTMA since the Texas rules changed, in general the manner in which it was opened is how it stays until either cashed out or age of majority. I am also in Texas and fall prey to that same issue, but since my child is 10 years away I have not worried about those implications. I am more concerned with accumulation of value in the account so that less will have to be borrowed for advanced education.

I would call your local bank to see how they are handling the change in account style, to get a suggestion on what you can and cannot do in the way of attaining age of majority.

In the bigger picture, if 4 years of college cost $50k and you have saved $30k in your child's account, the best strategy remains to pay cash for tuition etc until the account is depleted and then go after the student loans. There is no reason to accumulate debt on behalf of your child for which they are responsible for repaying upon graduation unless absolutely needed. The longer you can put off borrowing for education the better.

I see more and more people worry about getting funding for education when there are ample funds to cover a year or two before the need to borrow. The free grant money is available for those students who have zero assets and their parents have very low income. The loans are for the middle class folks etc as a supplement to the funds that have been saved along the way, sometimes that amount is zero as well so the student in this case becomes burdened with a higher amount of debt quicker in life.

good luck,
Jenn
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