Planning for a Child’s Education

1. Planning for a Child’s Education Jerome Brooks David Sevy Tobi Vincent

2. $286,000! The approximate future cost to fully fund four years of college expenses for a newborn at a private university!

3. Why we chose this topic… We all have children ages 18 months or less Whatever principle of intelligence we attain unto in this life, it will rise with us in the resurrection. D&C 130:18

4. Understanding the costs • Key factors to consider • What type of school your children will be attending – public or private • What percentage of the funding will you supply as a parent • How many children you will be sending to college • How many years until your children reach college age

5. 5.8% 5.3% 9.6% Education costs continue to rise Average annual increase in education costs

6. Education Funding Options • Qualified Tuition Program • ESA – Coverdell Education Savings Account • UGMA – Uniform Gift to Minors Act • UTMA – Uniform Transfer to Minors Act • U.S. Savings Bonds • IRA • Hope Scholarship Credit • Lifetime Learning Credit

7. Qualified Tuition Programs • College Savings Plan - 529 • Maximum contribution above $100,000 • Anyone can contribute • May be state or local tax deductible • Grows tax deferred • Tax-free distributions for qualified purposes • Prepaid Tuition Plan • Guaranteed to rise at the same rate as tuition • Best if used for in-state, public institutions • Can be used only for tuition • Can be transferred to other family members

8. ESAs • Coverdall Education Savings Account • Supplement for other education savings • Maximum contribution $2000 annual • For Children under 18 • Multiple people can contribute • Contribution are non-deductible • Tax benefits • Assets grow tax deferred • Usually state tax deductible • Withdrawn tax-free for K-12 and college

9. What is a custodial account? An account set up by a “custodian” for the benefit of a third party • UGMA • Uniform Gift to Minors • UTMA • Uniform Transfer to Minors • Savings fund is placed in the name of the child

10. Using your name Advantages Complete control Funds can be used for other goals Disadvantages Doesn’t use child’s tax rate Reduced contribution to personal retirement plans Using your child’s name Advantages Lower taxes for earnings No contribution limits Disadvantages Child may not pursue education Assets are irrevocable Child takes full control at age of minority May limit child’s opportunity for financial aid Why use an UGMA/UTMA?

11. Tax credits and deductions • Hope Scholarship Tax Credit • $1,500 tax credit per year per student • First two years of college • Modified AGI $80,000 to $100,000 jointly • Lifetime Learning Credit • $2,000 maximum per return • Unlimited number of years • Modified AGI $83,000 jointly

12. Financial Aid • Approximately 55% of students rely on some type of financial aid • Options • Grants • Subsidized loans • Merit based scholarships • Work-study programs

13. In Conclusion • To fully fund the education of a newborn, you will need approximately $286,000! • Start planning early to ensure… • A secure future for your child • Peace of mind for yourself • Financial rewards for both of you • Social benefits for everyone

14. Where can I learn more? • E*trade • Fidelity Investments • Salomon Smith Barney • Firstrade • Your bank • Your personal investment planner

15. Thank You