UTMA vs. 529 Plan (Estate Planning Attorney)

What kind of plan should I fund for child’s education?

There are a number of choices, including: 529 Plan, UTMA (uniform trust for minors act), Coverdell & more.

I’m going to highlight the differences in 2, the 529 vs. UTMA.

UTMA—it’s an irrevocable gift to that minor. Irrevocable means you can’t take it back. There’s no stipulation for use. So depending on the language, somewhere between 18 & 21 the minor, then an adult, can say “Gimme my money”.

In my opinion, not the greatest way to give money to a child or grandchild. Your purpose may have been for them to use for college, instead they go down and purchase a Porsche or jetski. For the law on UTMA, see: http://www.ncleg.net/gascripts/statutes/statutelookup.pl?statute=33a (this is the chapter of the North Carolina General Statutes on UTMA)

529 Plan. Used for post-secondary educations, including colleges, universities, community colleges, technical schools. Great advantages include: 1) Rollover (transferable) to another family member if the whole amount isn’t used for the intended family member, 2) tax free on the investment income, 3) in particular situations, the money invested is tax free, 4) the manager in control can withdraw for non-qualified reasons subject to a penalty. See the Wikipedia article here for more information:

http://en.wikipedia.org/wiki/529_plan Also, see the SEC publication: http://www.sec.gov/investor/pubs/intro529.htm . If you can’t tell, I’m a fan of the 529 plan. Look at each state’s offering of plans. Some states use better investment fund managers. Anecdotaly, I for one use the Virginia Plan even though I’m a North Carolina resident.

Disclaimer: Any investments that you make in a plan should be through a qualified financial institution. Sanders Law Firm, PLLC and its attorneys don’t give investment advice.

Call Sanders Law Firm, PLLC at 336-724-4707 for wills and estate planning. E-mail kirk@kirksanderslaw.com

The firm also handles cases involving Fiduciary litigation, will caveats, will challenges, POA abuses, elder abuse.

Tags: estate planning attorney, 529 plans