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Educational Planning

"An education is the most valuable gift a family can give to a child, providing a lifetime of benefits."

Early planning is the hallmark of successful educational planning. When considering strategies to pay for college funding an early start affords the benefit of compounding returns. In addition, educational funding doesn’t necessarily have to rest entirely with parents. Today’s college savings plans offer many alternatives that provide benefits for grandparents, aunts, uncles, and other family members as well as for the child.


Plan For Your Child's Future Today

Although it is best to start the college investment process when your child is young, it is never too late to begin. No matter your child’s age, what’s important is that you plan now.  It is easy to put off thinking about these expenses, hoping that your child will receive scholarships or financial aid. But don’t count on them. While these awards do help with college funding, they are not guaranteed, not always comprehensive and not available to everyone.


Which Plan is Right for You?

With many new college saving alternatives available, it is critical to choose the one that’s appropriate for you. Selecting the wrong plan, or not investing properly within the right one, may keep you from maximizing your savings. However, BNB Wealth Management, LLC can help you select  the most appropriate choice for your particular situation.


Consider the Following Before Selecting a Plan

  • What are the tax benefits?
  • Who will control the funds?
  • How much risk is involved?
  • Are there contribution limits that may hinder your ability to meet savings goals?
  • Are large contributions subject to gift taxes?
  • What investment options are available?

As a parent, you want the best for your children, especially when it comes to their education. However, with the cost of higher education steadily on the rise, you may have concerns about how to fund the quality education your children deserve.

For the 2009-2010 school year, the average cost of tuition and room and board was $14,793 at an in-state four-year public college and $35,636 at a four-year private college, according to


Ways to Fund Your Childs Education

529 Savings Plans and Coverdell Education Savings Accounts offer you two excellent ways to accumulate assets for projected higher education costs.


529 Savings Plans

A 529 Savings Plan is a type of plan named for the section of the IRS Code where the plan is explained. These plans offer estate planning advantages and their tax benefits were enhanced by the 2001 tax law changes.


Here are some of the key benefits:

  • Contribution limits are extremely high. Depending on your state of residence, you may be able to contribute more than $250,000.  Some states even allow you to take a tax deduction on your contribution. 
  • All earnings in a 529 Savings Plan accumulate free from immediate taxation.* As long as the money is used for higher education costs, it can also be withdrawn free from federal taxation. Qualified expenses refer to tuition and fees and educational-related expenses, e.g., the cost of uniforms, supplies, books, etc. 
  • Most plans offer a great deal of flexibility, from making investment choices to changing your beneficiary to determining how to spend the assets. 
  • A 529 Savings Plan has no annual income eligibility limits.


Coverdell Education Savings Accounts

Another good tool to supplement your education savings is the Coverdell Education Savings Account, formerly the Education IRA.  These accounts have been greatly enhanced by the recent tax law changes.

  • You can make much higher contributions than you could to an Education IRA. For 2010, the contribution limit to Coverdell ESAs is $2,000 from all sources. In 2001, the contribution limit for the Educational IRA was just $500.00.
  • You have the flexibility to fund your Coverdell with a wide range of financial products, including mutual funds, individual securities and bank Certificates of Deposit. 
  • If needed, you can access your assets to pay for elementary and secondary school expenses. 
  • All earnings grow federally tax-free for as long as they remain in the account. 
  • If assets are withdrawn for "qualified expenses," you do not have to pay any income taxes on those earnings. Qualified expenses refer to tuition and fees and educational-related expenses, e.g., the cost of uniforms, supplies, books, etc., for a child or grandchild. 
  • If you are single and your Adjusted Gross Income (AGI) is less than $110,000 annually, you can contribute to a Coverdell. Adjusted Gross Income is that amount a taxpayer must use for computing income tax. It is determined by subtracting from gross income any unreimbursed business expenses or deductions, such as moving expenses.  If you are married, you and your spouse are eligible if your AGI is less than $220,000 annually. (The maximum contribution limit is reduced for married couples filing jointly who earn between $190,000 and $220,000. Please consult your tax advisor for more information.)
  • Having a 529 Savings Plan does not preclude you from establishing a Coverdell Education Savings Account, provided you meet the eligibility requirements for the Coverdell.

In addition to opening a Coverdell or 529 Savings Plan, consider establishing a regular investment account for college planning and contribute to it regularly, such as monthly or quarterly. Contributing regularly enables you to enjoy the benefits of compounding, one of the fastest ways to build wealth over time. Compounding is the amount earned on your original principal plus income, capital gains and/or accumulated interest reinvested.

For more information about the Coverdell Education Savings Account or the 529 Savings Plan, call your financial advisor today. He or she will help you create the college-planning strategy that best suits your financial needs.


Start your childs educational funding today!

The time to plan for your child’s future is today. Contact us today at (888) OVERSEE for a no-obligation analysis of your college planning alternatives.

Any comments regarding tax implications are informational purposes only. BNB Wealth Management, LLC does not provide tax or legal advice. As always, you should consult your tax or legal advisor.

*Tax provisions allowing federal income tax-free withdrawals for qualified expenses will expire 12/31/10 unless extended.