Would like to have control over the $$ but don't want the tax liability as it grows (my tax rate is high). Are 529s really that good -- or too limiting if the kid turns into a screw-up? Thank you.
2006-06-28 07:27:36 · 6 answers · asked by Makakio 3 in Business & Finance ➔ Investing
I would prefer to invest into 529 than in a mutual fund - just for tax reasons (if it's an in-state plane, contributions are usually tax-deductible for state taxes and capital gains are tax exempt, at least until 2010 and hopefully the Congress won't forget to extend the tax exemption status). Regarding performance - you can choose a 529 (if it's out-of-state, the investment probably won't be tax-deductible) and even switch plans later. I believe.
If the kid turns into a screw-up and refuses to take any classes, you have two choices - change the benefactor of the plan (it can be even yourself - maybe you'll decide to study?) or withdraw the money (in which case there is a 10% penalty plus taxes on capital gains, I believe)
2006-06-28 07:50:58 · answer #1 · answered by hec 5 · 4⤊ 2⤋
529s are better than UTMA or UTGM accounts. UTMA/UTGM accounts are risky if you think your nephew may not use the money as you would like. They are true gifts and the child gets them at a certain age 18 or 21. The funds grow with some tax benefits. 529s have more tax benefits and controls on how the money is to be used. However, 529 don't force the child to use the funds for college. If you want maximum control and tax efficiency consider and Ed IRA invested in an Index ETF. If you would like assistance setting something up feel free to contact me. See my hompage below.
2006-06-28 14:42:03 · answer #2 · answered by David S 1 · 0⤊ 0⤋
I'd go with the 529. Your nephew will have something like 10 years after high school to start using the money, so he can screw up for quite a while without your generosity going to waste. You can also transfer the money to someone else, or withdraw it with a penalty.
2006-06-28 15:29:37 · answer #3 · answered by rainfingers 4 · 0⤊ 0⤋
you can invest in municipal bond fund. most of the municipal bonds are exempt from state and government taxes.
2006-06-28 14:33:02 · answer #4 · answered by vika 2 · 0⤊ 0⤋
Mutual funds. Safest in my opinion.
2006-06-28 14:29:06 · answer #5 · answered by billgutsky 3 · 0⤊ 0⤋
best way you said it invested in his college fund
2006-06-28 14:29:39 · answer #6 · answered by jrod2210 2 · 0⤊ 0⤋