Education Planning

Question 1

What’s the most tax efficient way to save for a child’s education but not impact their financial aid availability between an UTMA, CESA, & a Roth IRA?

Answer 1

A Roth IRA, preferably into the Roth of a parent who will be older than 59.5 years of age when distributions need to be made

A CESA is an asset of the parent and would negatively impact the equation for EFC

An UTMA would be the worst due to it being an asset of the student and have a higher % in the EFC calculation

Question 2

What assets are & aren’t considered when applying for financial aid?

Answer 2

ARE considered

• non-retirement assets
• investment accounts of the parents and student

ARENT considered

• retirement assets of student and parent
• personal property (vehicles)

Question 3

What would a family do to reduce the EFC if they have personal assets, investment accounts, retirement accounts, & bank accounts?

Answer 3

Move assets from the investment accounts to IRA’s, the balance sheet wouldn’t change but it would reduce the EFC