Posted by The 8-year-old Ryan, who was ranked No. 2200 on YouTube last year, earns 15 million U.S. dollars in annual income. There is a long line of pancakes selling XNUMX dollars apiece at the Chinese annual meeting. These tumultuous cases make people can’t help but doubt the opportunity for higher education. Whether the cost is too high.However, for most Chinese families, higher education is still the only way to go.
The cost of higher educationIt is indeed not to be underestimated. According to the United States "National Non-profit (2017 Annual Revenue: $11 billion) College Entrance Examination Organization": data released by the College Board, each yearHigher education tuitionThe average growth rate is inflation + 3%, which is about 6%.In order to encourage parents to plan ahead, the state government and educational institutions provided some tax incentives and dug some "dinosaur fossil pits" that should have been filled long ago.Today, let’s take a look at the choices of education savings plans in the American society, which is famous for the quality of higher education.
There are now many product advertisements about "education savings accounts" on the Internet. These accounts basically have no threshold and can be opened in 10 minutes online.In this article, we will start from these "dinosaur pits" to avoid accidentally stepping on thunder.
1. Custodial Accounts (UTMA/UGMA)
What is a custodial account?As the name suggests, the money put into the account is kept by a guardian before the beneficiary reaches adulthood, and the account belongs to the minor's name.The guardian will lose control of the account when the child reaches adulthood.
Quota limit:The money in the custody account is equivalent to the gift of the parents, and the annual gift of each parent to each child is $15,000.
Taxation:Many parents hope to hide cash in the accounts of minors to enjoy tax relief.However, according to the 2018 tax law, only $2,100 of unearned income in the investment account of minors is tax-exempt, and the tax on passive income over $12,500 is as high as 37%.As there are few tax incentives, the after-tax distribution in the custodial account can be counted as a tax deduction for American Opportunity Tax Credit or Lifetime Learning Credit.
Beneficiary:Cannot be changed.Once the beneficiary reaches adulthood, he has full control of the assets in the account.
2.Coverdell Education Saving Accounts (ESAS)
The Coverdell (named after the senator who promoted this education savings account) education savings plan was "born" in 1997 and is equivalent to an IRA plan for children.There are so many restrictions that people can't believe it is a post-90s generation.
Quota limit:Each child is $2,000 per year (different donors are possible), which must be used up before the beneficiary reaches 30 years of age.
Taxation:Tax deferred; the donor's adjusted gross income (AGI) is between $95,000-$110,000, or the tax-declared income of the donor is within the range of $190,000-$220,000 to enjoy tax deferred growth.If it is used for education-related expenses such as tuition, textbooks, accommodation, etc., income and capital gains tax are exempt.You can choose your own investment portfolio.
Beneficiary:Can be changed to any30Family members under the age of.
3. Education Bonds: EE Bonds & I Bonds
These two bonds issued by the U.S. Department of the Treasury are also relatively old choices.Fixed interest, settled on the maturity date of the security.
Quota limit:Per year$10,000The purchase limit for.There is a fine for redemption within five years.
Taxation:EE and I bonds purchased after 1989, if used as beneficiary’s higher education expenses in the year of redemption, and the bondholder’s personal AGI$ 78,150- $ 93,150Range, the common tax income is in$ 117,250- $ 147,250Interval, interest may be exempt from state and federal income taxes.
Beneficiary:Basically there is no restriction, usually the parent is the holder and the child is the beneficiary.Bond purchase age is at least24year old.
4. Education Savings Trust Account
The most well-known education savings trust account is 2503(c) Irrevocable Trust.
Quota limit:There is no upper limit in theory.
Taxation:Per year$15,000The following are exempt from gift tax.The trust income is taxed at the beneficiary's tax rate when it is used.The biggest impact is that the trust is counted as a child’s asset and affects the application for grants.
Beneficiary:The beneficiary obtains the ownership of the principal of the trust account as an adult.The funds placed in the trust cannot be withdrawn once they are placed.
After reading these old antique plans, is it a bit scratchy?In the next column, I will compare more with the timesEducation Savings Plan.
(This article consists ofHeather xiong©️AuthorizationAmerican Life Insurance GuideRelease, no reprint without permission)
Recommended reading:
01. Where is the university tuition deposited? Comparing the advantages and disadvantages of 529 plans and life insurance
02. 2018 university tuition fees have skyrocketed, how to plan for the education fund for children's universities?
03. List of Children's Education Fund Plans (XNUMX): Two more flexible options
