- Ohio Pensions
- Deferred Comp
- Where to Start
- Why Lineweaver
Saving for College is a long-term process that should often begins before a child is born. For 2020, the average annual cost of public college tuition is $20,770/year, with the average cost for private universities at $46,950/year. Those numbers are only likely to go up for the foreseeable future. Saving for college can be a huge burden on your family and their finances. Fortunately, there are several options available.
A 529 plan is a tax-advantaged account that lets you save for any education expenses. The contribution limits and rules are different in different states, but in Ohio, you can put up to $4,000 a year aside tax-free.
Uniform Gifts to Minors Act (UGMA)
Another strategy for helping to fund the education of a child or grandchild is by using an UGMA. This allows you to transfer money to children without a formal trust, and is managed by an adult custodian until the intended beneficiary comes of age. It is not tax-sheltered, but taxed at the lower “kiddie tax” rates. It matures when the beneficiary reaches 18 years of age.
Uniform Transfers to Minors Act (UTMA)
Unlike the UGMA, the UTMA allows a transfer of money to minors without an adult custodian, and also avoids taxes until the intended beneficiary comes of age. The donor can name a fiduciary custodian until the beneficiary reaches the age of 25.