- Ohio Pensions
- Deferred Comp
- Where to Start
- Why Lineweaver
Saving for College is a long-term process that should often begin 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 a 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.