Sec. 1 - Ch.6: Education Planning

Question 1

What are the savings vehicle options before a child goes to college?

Answer 1

• UTMA/UGMA
• EE Education Bonds
• Coverdell Education Savings Plan (ESA)
• Section 529 Plan

Question 2

What are the graduate education funding options?

Answer 2

• Fullbright Scholarship
• Stafford Loan
• 529 distribution OR Coverdell withdrawal (cannot be used on the same expenses, have to coordinate)

Question 3

What are the education tax credits available?

Answer 3

American Opportunity Credit & Lifetime Learning Credit

Question 4

What grants/loans are available to a family that makes less than $70,000/year?

Answer 4

• Pell Grants
• Supplemental Education Opportunity Grant
• Subsidized Stafford Student Loans

Question 5

What grants/loans are available to a family that makes more than $70,000/year (wealthier family)?

Answer 5

• Parent loan (for undergraduate students)

Question 6

529 Plan Ownership - Can en entity own a 529?

Answer 6

• Parents/Grandparents
• Single people with no dependents (aunts/uncles/friends)
• A trust
• Yes, an entity can establish a 529. The entity can be an individual, corporation, partnership, trust/estate, or any person acting in a fiduciary capacity

Question 7

What happens if a successor owner is named on a 529 account? What is the best option when naming a successor owner?

Answer 7

If the owner names a successor, that individual will take over the ability to change beneficiaries, request funds, and make other decisions that original owner didn’t want
- The best option would be to name a trust as the successor owner. This way the original owner can still control disposition of the account.