Planning for College Expenses

As a parent with potentially college-bound children, you are probably concerned with setting up a financial plan to fund future college costs!

The scary part is how much college might actually cost if you currently have young children. I have used the “College Cost Projector” calculator on the collegeinvest.org website to determine the potential costs for our children (ages 5 and 8). It is a daunting number to look at and I now hope our kids will get a full academic or athletic scholarship!

Here are some tax-advantage strategies to save for future college costs. Please discuss these strategies with your tax or financial advisor as each one has limitations that might not be fully explained here and depend on your personal tax situation such as income and filing status. I also have limited the discussion on each strategy due to space limitations.

Series EE U.S. savings bonds. Series EE U.S. savings bonds offer two tax-savings opportunities: first, you don't have to report the interest on the bonds for federal tax purposes until the bonds are actually cashed in; and second, interest on “qualified” Series EE (and Series I) bonds may be exempt from federal tax if the bond proceeds are used for qualified college expenses (room and board does not count). Other tax-exempt bonds can also be used.

Qualified tuition programs. A qualified tuition program (also known as a 529 plan) allows you to make contributions to an account set up to meet a child's future higher education expenses. Qualified tuition programs can be established by state governments or by private education institutions. Contributions to these programs aren’t deductible for federal income taxes but can be on your state tax return. The earnings on the contributions accumulate tax-free until the college costs are paid from the funds. Distributions from qualified tuition programs are tax-free to the extent the funds are used to pay qualified higher education expenses.

Coverdell education savings accounts. You can establish Coverdell ESAs (formerly called education IRAs) and make contributions of up to $2,000 annually for each child under age 18. This age limitation doesn't apply to a beneficiary with special needs, defined as an individual who because of a physical, mental or emotional condition, including learning disability, requires additional time to complete his or her education. Although the contributions aren't deductible, income in the account isn't taxed, and distributions are tax-free if spent on qualified education expenses.

Retirement contributions by your children. If you are a business owner and can hire your child under a valid employment agreement for their age, your child can contribute to an IRA that can be used for education expenses with little tax consequences.

There are many ways to pay for your child’s college expenses including scholarships, student loans, employer educational assistance programs, tuition reduction plans for employees of educational institutions, student loans, bank loans, borrowing against retirement plan accounts, and potentially taking withdrawals from retirement plan accounts (I caution against this last one, though).

Not all of the above breaks may be used in the same year, and use of some of them reduces the amounts that qualify for other breaks. So it takes planning to determine which should be used in any given situation.

Trey D. Horton, CPA, MBA

Abacus Accounting Center, LLC

The blog post Planning for College Expenses was originally published to Wills & Wellnes, Denver, CO

Today’s Modern Families Face Troublesome Estate Planning Issues

Since divorce is on the rise, as well as second marriages, blended families have become the new norm – the new modern American family.  In today’s blended family, Spouse A and/or Spouse B might have children from a prior marriage, and they might have a child together as well. In these types of family units, there are unforeseen complications regarding inheritance that may surface, which can cause tension and damage family relations. For example, as a spouse in a blended family, you probably brought both assets and children into your new marriage.   Like most people, if something happened to you, you might leave all your assets outright to your spouse because you want to make sure your spouse is taken care of during their lifetime, and you also may want to ensure your children will receive a portion of your estate.  However, without a proper plan outlining your wishes, your spouse is not legally obligated to pass along your children’s intended inheritance.  Even though it sounds unlikely now, after you pass, your spouse and children may grow apart, or they might have conflicting interests down the road.  The bottom line is that the surviving spouse always has the option to execute a new Will and disinherit your children. Or alternatively, if the surviving spouse is young, he or she may deplete most of your children’s potential inheritance, so that there is very little to nothing that will be transferred to them after he or she passes. Therefore, the question remains: How can you ensure none of your children become disinherited?

Fortunately, there are solutions to common estate planning problems that blended families face. In a well drafted Will or Trust, you can outline your specific wishes and goals, which can help ensure both your spouse, and all of your children, are taken care of when you are not around.

Many blended families have turned to Trusts to fulfill their estate planning objectives. Specifically, many people in blended families are turning to a QTIP Marital Trust.  In this type of Trust, the surviving spouse can receive income from the QTIP Trust for his or her benefit throughout their life; however,  he or she can be restricted from accessing the Trust’s principal, which would ultimately be transferred to the children upon the passing of the second spouse.  Additionally, another protection provided in a QTIP Marital Trust is that the surviving spouse is not able to change the terms of the Trust, so he or she is prohibited from disinheriting your children. Another alternative for blended families is that they can draft an estate plan that states upon the death of the first spouse, the surviving spouse will then provide gifts – monetary or otherwise – to your children.  If this occurs, your children do not have to wait until the surviving spouse passes to inherit, and they are guaranteed to benefit from your estate. One way this is achieved is by purchasing a life insurance policy and designated the proceeds payable to your children. Thus, your children can receive a large cash sum immediately upon your death, and the remaining estate assets can be left to support your new spouse. Whatever you decide is best for your family, it is important to know you have options.  It is also very important to receive guidance from an experienced estate planning attorney to draft a plan that meets the various goals and needs of your family, which will both provide for a living spouse and your children. Contact a Wills & Wellness attorney today, or attend one of our free educational talks in your neighborhood, to learn more about putting a plan in place that will protect and provide for all the members of your family.

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And then there were…… FIVE!!!

Kristin and Chris have called many places home over the years, but really for them, Home is where they are together. One might even say that their family are true global citizens with three nationalities, different last names and every shade of skin tone. But as they have told their sons many times, families are made in many different ways but in the end it only matters that they love each other.

Kristin grew up in Colorado and Chris is from London but their family considers Colorado their most permanent address and home base. They have three children from infant to tween. They often joke about their poor planning, as they will have to endure the teenage years for the next 20 years! Chris and Kristin expanded their family from two to five members rather quickly. JJ, the eldest, started it all off by turning the couple into the “three family” four years ago. Three years later Francis joined the family making it four. And just when they thought they were done expanding, along came little Alba just this year to make them a family of five!

Their house is anything but boring with lots of action and noise. Family free time, when it can be found, is spent taking walks, watching movies and playing card games with the boys. All three boys love to watch soccer (or football as it is called in London) and it is definitely the go to activity when outside. Their favorite vacations involve either mountains or beaches, however the boys dream of going to London and Italy one day.

Honesty, gratitude, respect for themselves and others, hard work, kindness and forgiveness are all virtues that they try to incorporate in their everyday lives. With the boys being told very often to be mindful of what they are doing or saying and how it might impact others and themselves. Given that Chris and Kristin’s work take them overseas, primarily in Africa, they are trying to teach their children through example the same sense of service for those less fortunate.

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Parenting = Strategic Planning

Wills & Wellness is excited to have Christie Sears, Child, Couple and Family Therapist, guest blog for us this month. Christie will be joining Wills & Wellness in presenting to families at Baby & Co in Wheatridge this fall about how to create peace of mind through estate planning. Thanks for the advice Christie! Balance is key to a happier, healthier life and relationship with your partner. Having a baby usually throws most people off-balance and can disrupt any "normalcy" you may have created pre-baby. Getting used to this "new normal" can be a struggle for some parents. This is why I believe in finding a plan that works for you, your partner, and your baby so everyone can function at their best.

“You need time for yourself to recharge, but you also need time with your partner.”

Here are some ideas to help you strategize a more effective parenting plan: 1) Set a schedule. This includes eating, playing, and napping. Try to keep things around the same time every day as much as you can to ensure more consistency for your baby and sanity for yourself. 2) Take advantage of nap times. If you have a baby that can sleep for long stretches, take advantage of this time. Take that time that your baby doesn't need you to do something for yourself, your relationship, your home... whatever you need. 3) Share parenting responsibilities. When only one partner does it, it can feel unbalanced and that person may start to become resentful. Try to even it out in a way that feels fair for both of you. 4) Practice self-care. If you aren't taking care of yourself and your needs, you won't be able to take care of your baby or your relationship with you partner as effectively. Put on your own oxygen mask before anyone else's! 5) Get a babysitter. You need time for yourself to recharge, but you also need time with your partner. Go out on a real date. Hold on to your friendship that brought you together in the first place. If you're going to parent together, it will be much easier if you actually still like each other and want to be around each other. Parenting is hard, but it's not impossible. You just need a plan!                 Christie Sears Thompson, MA Child, Couples, and Family Therapist Trade Winds Therapy, LLC http://ift.tt/1VXbG3m 720-381-2755

Parenting = Strategic Planning is republished from http://ift.tt/1GYrgWo