Posts: 591
From: Ohio
Registered: JUL 2001

Posts: 998
From: Holtsville, NY, owner Vistana Orlando and Dikhololo
Registered: DEC 2000

posted 01-10-2002 11:41            

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check out Upromise.com. They have companies that give a portion of your purchases to a college account for you. I registered in Nov. and got $17 credit in the month of December. Then I leased a GM car (was going to do it anyway, had nothing to do with upromise) and got $150 contributed to the account. Both my sons names are on the account. This isn't a long term plan, but it is free money!!

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Jacki

Posts: 2485
From: East Coast, Mid-Atlantic; Club Sunterra Founding Member
Registered: DEC 2000

posted 01-10-2002 11:42            

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Sell the stocks, pay the taxes, invest in timeshares and rent them out at huge profits.

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Isn't timesharing (and TUG) great?!*!

Posts: 764
From: Houston,Tx,Usa
Registered: AUG 2001

Posts: 2616
From: Brewster Green, Marriott Harbour Pointe
Registered: SEP 2001

Posts: 1365
From: Washington, DC - Owner: Vistana (Cascades), The Pointe Resort & Club (WI); Flamingo Beach; The Summit at Massanutten; & Hershey Vacation Club & Resort
Registered: DEC 2000

posted 01-10-2002 13:56            

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I know some people will scoff at me, but I bought Series EE savings bonds. I started buying $300/month via payroll deduction (that cost me $150) when the kidlet was 3 months old and quit when she turned 10 since they take 10-11 years to reach their full face value. They started out a guaranteed 6% return when I started and are now a guaranteed 4% return. She's now 12 and will have $40K+ to use for college in 6.5 years. Series EE are tax free if used for Tuition and Fees, but not if you use them for room and board.

People scoffed at me because you could, in theory, do better with mutual funds in the stock market. I kept hearing an average of at least 8%, but the stuff I was buying just wasn't getting returns like that.

The past two years I tried the mutual funds route (and I'm still there), but despite paying taxes on $3K in 'earnings' on my daughter's UGMA's (uniformed gift to minors accounts), last year all of her funds lost money (they are all lower then the initial investment, despite earning dividends and LT and ST capital gains), and these were all funds that had double digit returns for the past 5 to 10 years in the past. I finally sold one yesterday that had lost more than a third of its value in the past two years and didn't have a snowball's chance in you no where to improve in the foreseeable future.

If savings bonds don't excite you, and you don't want to use one of the pre-pay college fund options, you could open up an Education IRA. You can deposit up to $500 per year into an Education IRA for a child under age 18. I think these might also go by the name of Roth IRAs, but they could be two different IRA's.

[This message has been edited by BDK (edited 01-10-2002).]

Posts: 6257
From: Boston, MA
Registered: DEC 2000

posted 01-10-2002 14:05            

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As pcgirl suggests, consider a so-called Section 529 plan. Why?

Some key features:

• The income is not taxed as the fund grows and, under a new 2001 tax law, should not ever be taxed to anyone, to the extent used for the intended college education purpose.
• The funds can be used at any college or university in the U.S.
• Beneficiaries can be changed in the event that the expenses are not needed for the named beneficiary’s college expenses.
• Funds can be withdrawn for other than college expenses, with any income portion subject to taxation and (in most cases) a 10% tax penalty.
• You control the investments and the funds. The child does not gain access to the funds when coming of age.
• Virtually all states have a Section 529 program. However there is often only one or a few entities in each state that offer the plan. You can participate in the plan (or plans) of any state, whether or not you are a resident of that state.
• Current U.S. Department of Education guidelines provide that, because the funds belong to you, your child will not adversely impacted for purposes of obtaining grants, scholarships and loans as much as if the funds belong to the child, such as under a UGMA gift/trust program.
• Under current tax rules and the rules of most 529 programs, each donor can give up to $11,000 per year ($22,000 for a married couple) to the account of each child without any gift tax consequences and can give more under some circumstances.

Why is this program better than other savings plans? A few of the disadvantages of other plans:

• Accounts set up for the benefit of children under various state or UGMA provisions are much less advantageous. The income in such an account is normally taxed each year to the child or to the donor, depending on who the owner is. The child generally gets access to the funds at (usually) age 18 and can use them for any purpose, whether college related or not.
• State-specific tuition programs usually limit the use of funds to college expenses at universities and colleges in a specific state. This may make it necessary to “force” the child to attend college in a specific state or forfeit some or all of the benefit of the invested funds. This is not an enviable position.
• Although parents might believe they can invest on their own more wisely than Fidelity or some other fund holder might, the parent would not be able to shelter self-directed investments of future college funds from income taxation.

For one of many views of the details of 529 plans, go to this Fidelity link for more detailed information of the specifics of one such plan.

Posts: 326
From:
Registered: JAN 2001

posted 01-10-2002 14:07            

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I know this may not be what you were looking for. But I have a 20 year old. We saved very little for her college. But we were blessed. She received 3 scholarships that pays almost all of school tuition. She scored very high on her college entrance test which was the criteria for one of the scholarships, and the grades she made in high school gave us the other, and the other is thru my husbands work. I pay the rest which is a small amount, and I buy the books. But she is going to school and living at home. If she had decided to go away for college, I would have had to borrow the $$ for living expenses propably. So promote that they study hard, and apply all they can for scholarships. I hear that there are a lot of scholarships that people are not applying for. Of course saving will help!
The small savings we did have we let her use as a down payment on a new car.

Carol

Posts: 1135
From: River Forest, IL and Dikhololo and Seapointer, SA
Registered: DEC 2000

posted 01-10-2002 15:47            

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I found out about 529 plans from TUG which recommended www.savingforcollege.com, a great resource. We had been saving in a uniform gift for minors account for the kids but have now switched to Illinois 529 plan and liked those to upromise.
Also www.fastweb.com is a great resource for scholarships and the 15 year old is not too young to start looking.

[This message has been edited by marion10 (edited 01-10-2002).]

Posts: 1411
From: Oak Park, IL Owner: Swallowtail, Hilton Head, SC; Villa del Mar, Puerto Vallarta and FoxRun, NC
Registered: DEC 2000

posted 01-10-2002 16:33            

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I have a 529 account for my youngest son that is set up with Upromise. We contribute to it monthly and I consider the Upromise money just an extra bonus. Why not?

I won't reiterate all the points already mentioned. I only wish they had 529s when my big kids were young.

Debbie

Posts: 2112
From: Seattle WA, USA Owner: 6 weeks in Whistler, BC
Registered: DEC 2000

posted 01-10-2002 16:54            

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Is it possible to transfer stock into a 529 plan versus cash, and in this way avoid paying capitol gains on the stock?

Kris

Posts: 276
From: Mtn. View CA Owner at Sunburst (Steamboat Springs CO), Sand Pebbles (Solana Beach CA) & Strand Pavilion (So. Africa)
Registered: DEC 2000

posted 01-10-2002 17:47            

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quote:

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Originally posted by krisj:
Is it possible to transfer stock into a 529 plan versus cash, and in this way avoid paying capitol gains on the stock?

Kris

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No.

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hiteklawyr@aol.com
DISCLAIMER: This is general information and does not constitute legal advice. Your state's law may have an impact on your specific situation. Before taking any action based upon this information, it is essential that you consult your own attorney.

Posts: 362
From: Maryland
Registered: FEB 2001

posted 01-11-2002 05:37            

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We've not looked too deeply at the 529 plans...yet. We started saving pretty seriously for the kids in UGMA and other mutual fund accounts in our names when the boys were both born. They're now 10 and 7. Hopefully, there's now enough in the accounts to get them to at least a public in-state university. Right now, we're not contributing to the accounts any longer. We've recently refinanced our mortgage and hope to have it paid off in another 6-8 yrs. The "college savings" account is now going into our home equity. If all goes to plan, we'll have the burden of a monthly house payment gone when the oldest is first going to college. Of course, that cash then becomes necessary for possible tuition and fees, incidentals, and askidentals (the money they come looking for when the incidentals runs out).

I'm wondering if it wouldn't be better to sell some of the funds we now have, pay the tax or take a loss, then repurchase into a 529 for more tax advantage now and down the road. I haven't talked to our financial advisor about this yet, though.

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Mike

Posts: 671
From: Middletown, NJ Owner - Vistana, Orlando, Vistana Beach Club, DIK, Casa Del Mar,Aruba Casitas Del Monte
Registered: DEC 2000

posted 01-11-2002 11:50            

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Keep saving everyone..our son is ciurrently a junior at Stanford and it is running close to 50K a year. Luckily , we saved it all with a UGMA account depositing 500.00 a month , since he was 3 years old. The stock market was doing great during those years..not so now.

While home on Christmas break, he told us he wanted to stay at Stanford an extra year..to graduate not only with a BS in CS, but also a BA in Philosophy. He claims to need 'depth' in his life!!! Our response wasa fine..but he can pay for the 'depth'..and we suggested he drop by the financial aid office for a student loan for year 5!!!!

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Susan

Posts: 591
From: Ohio
Registered: JUL 2001

Posts: 354
From: Canton, Ohio, USA
Registered: AUG 2001

posted 01-11-2002 12:50            

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BDK

I have funded my children's college several ways, but one of them was EE bonds. Did you know that you can declare the interest earned on them as it accrues? I filed a tax return for my child at age 1 and listed the accumulated interest on her EE bonds. Once done, you don't have to file again until the interest earned exceeds minimum filing requirements. She is now 17 and starting college next fall and I plan to use her EE bonds to fund her spending money. I will send her a bond a month which she can cash and there will be no tax on the interest, as it was already declared in prior years. She has enough to get $200/month for 4 years, all tax free.

Posts: 2485
From: East Coast, Mid-Atlantic; Club Sunterra Founding Member
Registered: DEC 2000

posted 01-11-2002 13:34            

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I think it gets taxed at the parent's rate until they're 18 or something like that. Then they're on their own for taxes.

quote:

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Originally posted by Julie Morrison:
I had heard that you can transfer stock into a UGMA and then the child is only taxed at 9% when sold. Anyone know about this? Any other ideas on how we could use some of this stock to finance their college careers without having to pay the unbelievable capital gains (this stock has been in the family for years and years, we inherited it). We hate to do the UGMA thing because of the child having total control of it at age 18, college or not! Not that my daughter would do anything wrong.

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Isn't timesharing (and TUG) great?!*!

Posts: 591
From: Ohio
Registered: JUL 2001

Posts: 1804
From: Denver, CO
Registered: OCT 2001

posted 01-11-2002 15:38            

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The latest version of the old standard "US Savings Bonds" are "Series EE", probably an internet search would give you more info.

I believe they have a minium interest guarneteed (4%???) and, I had heard that you can cash them for college costs and not pay tax on the interest.

Posts: 424
From: Indian River, MI, USA
Registered: DEC 2000

Posts: 1363
From: Gonic, NH, USA
Registered: MAY 2001

posted 01-14-2002 16:50         

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My only problem with the UPromise type plans is all the personal information you are voluntarily giving up when you get credit for the points. I grant they probably already know more about me then me, but I like to maintain the illusion of privacy.

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Michael

The skiing is great, come to NH/ME.

Posts: 354
From: Canton, Ohio, USA
Registered: AUG 2001

posted 01-15-2002 05:47            

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Lin

If you make too much money, they are not tax free at all. The way they ARE tax free is if you put the bonds in your child's name and let him declare the interest as it accrues. Then when he cashes them for college, the interest is already declared and doesn't have to be paid. A child can earn up to $600 a year in interest before any tax is required. Granted, in the last few years my kid has had to pay a nominal amount of tax on interest, ($34.00 last year), but college starts next fall and all her EE bonds can be cashed and no taxes are due on the interest.

I also have 11K in bonds in my name that I was going to use like you suggested, but back when I bought them in 87 I didn't know I would be out of the range for using them tax free. If we cash them they are taxable.

Posts: 671
From: Middletown, NJ Owner - Vistana, Orlando, Vistana Beach Club, DIK, Casa Del Mar,Aruba Casitas Del Monte
Registered: DEC 2000

posted 01-15-2002 08:44            

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Lin- I totally agree with making the kids contibute some of this . My son has a tough work load but also works during the summer..and throughout the year has a dorm position which comes with a stipend. He also is working on 2 research project's at Stanford ..one is CS and one in religious studies that pay an hourly rate. Needless to say, he is very busy...

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Susan

Posts: 1365
From: Washington, DC - Owner: Vistana (Cascades), The Pointe Resort & Club (WI); Flamingo Beach; The Summit at Massanutten; & Hershey Vacation Club & Resort
Registered: DEC 2000

posted 01-15-2002 10:46            

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quote:

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Originally posted by shark105: BDK I have funded my children's college several ways, but one of them was EE bonds. Did you know that you can declare the interest earned on them as it accrues? I filed a tax return for my child at age 1 and listed the accumulated interest on her EE bonds.

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Thanks Shark. Yes I did know that. But I ran into a problem that prevented me from doing that, sort of. Originally the bonds were purchased as $200 in my name and $100 in my kidlet's name so that I could use my portion for tuition and fees, which would make them tax free, if my earnings were under the income threshold by the time I cashed them out. The kidlet could use her portion for room and board expenses (which are not considered tax free expenditures) and have the interest taxed at her tax rate. For the 10 years I purchased the bonds, they were held for safe-keeping by the military, in a computer (not hard copy). The only way I documented the purchase was via a line-item deduction on my pay stub that showed me that the purchase was being deducted from my monthly pay. After I retired and requested and received the hard copy of all my bonds, it turns out that some finance system conversion around year 3 (out of 10 years) didn't carryover the original purchase instructions. So when my bonds were printed in hardcopy, the last 7 years were printed totally in my name. I checked that all of the amounts were correct, and caught one that was missing, but after the first couple of years, didn’t check each individual bond to make sure the name/beneficiary data was listed correctly – since I hadn’t made any changes to my original order. By the time I discovered the "error", it was about a year after I received the hard copy of the bonds in the mail. The Savings Bond Office said that to correct all the bonds I would have had to file a separate form for each and every bond containing the error and also explain why I waited so long to get the error corrected. Somehow it just didn't seem worth the effort to file 84 forms just to be able to claim the interest on the kidlet’s tax return, now.

Posts: 354
From: Canton, Ohio, USA
Registered: AUG 2001

posted 01-16-2002 04:41            

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What a mess. I can see why you didn't bother.

Have you downloaded Savings Bond Wizard? You can get it free at the Bureau of Public Debt web site. I use it to keep track and figure interest earned. It' a very good program.