Financial advisors can be incredibly helpful when it comes to planning and funding a quality education for your child or grandchild. Here’s how they can make a difference:
1. Developing a Personalized Education Savings Plan
Advisors help assess your financial situation and recommend the most effective savings strategies, such as:
- 529 College Savings Plans: Tax-advantaged accounts specifically for education expenses.
- Coverdell Education Savings Accounts (ESAs): For primary, secondary, and higher education.
- Custodial Accounts (UGMA/UTMA): For broader use, including education.
- Trusts: For larger, long-term planning or more control over asset use.
2. Navigating Tax Advantages
They can help you:
- Maximize tax-deferred growth and tax-free withdrawals for qualified education expenses.
- Take advantage of potential state tax deductions for contributions to 529 plans.
- Understand how education savings impact financial aid eligibility.
3. Estimating Future Costs
Advisors use tools to:
- Project the future cost of tuition, room, board, and inflation.
- Create a timeline and savings goal based on your target schools or types of institutions.
4. Coordinating Gifts and Contributions
Financial advisors can assist with:
- Setting up gift strategies that comply with IRS rules (e.g., contributing up to $18,000/year per donor per beneficiary, or front-loading 5 years of gifts into a 529).
- Helping grandparents fund education without negatively impacting financial aid.
5. Planning Beyond College
If your child or grandchild receives scholarships or doesn’t use all the funds, advisors can:
- Guide you in changing beneficiaries or using funds for graduate school.
- Explore how leftover funds can be rolled over into a Roth IRA (as permitted under SECURE Act 2.0).
