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posted in: Education Funding

Gifts that Last a Lifetime

Make any gift-giving occasion more than a fond memory by contributing to the future of a loved one.

As special events approach, you may ask yourself, "What can I give my children or grandchildren this time?" Consider giving a gift that will help them enjoy a better future - a financial gift.

Donors can give up to $13,000 per person annually as a gift without gift tax implications. For those with a sizable estate, this type of systematic giving can substantially reduce the potential estate tax liability by decreasing the size of the estate. Your gift may be tailored to suit your budget.

Here are some ideas for a one-time or systematic gifting program:

Contribute to a Coverdell Education Savings Account

If you meet the income limits set by the federal government,1 you may contribute up to $2,000 per child to this education savings vehicle. Coverdell Saving Accounts allow money to grow tax-deferred and allow tax-free withdrawals if the money is used for qualified education expenses for the eligible child. Qualified education expenses include expenses for elementary and secondary education, as well as college expenses.

Contribute to a 529 Plan

Another type of education savings plan is a 529 Plan. These types of plans are operated by a state or educational institution and are designed to help families save funds for future college costs. The Section 529 Plan allows tax-free accumulation of earnings and tax-free withdrawals for college expenses, and there are no income restrictions on donors.

These plans also allow substantial contributions (which vary by state),2 and with some restrictions, higher gifting limits apply. Moreover, as the owner, you may stay in control of the account and determine when withdrawals are taken from the account and for what purposes.

Pay tuition expenses

If your children or grandchildren are already in college, consider making tuition payments directly to their college or university. Tuition payments made directly to the school (not to the student) are not considered gifts for purposes of the $13,000 annual gift exclusion.

Establish a Uniform Transfers to Minors Act account

You can give securities or other property to a minor with a Uniform Transfers to Minors Act (UTMA) account. As the donor, you name a custodian for the account. The custodian may then use the property or income from the property for the benefit of the minor. This type of account terminates and the property is distributed when the minor reaches age 18 or 21, depending on your state of residence. 

Buy a life insurance policy

Consider purchasing a life insurance policy for your children or grandchildren. Life insurance is relatively inexpensive for minors, and when appropriate, the minor may continue the policy so that they are protected for life. Policies can be purchased under the Uniform Transfers to Minors Act, or you may choose to own the policy.

Establish a Roth IRA

By establishing a Roth IRA for your child or grandchild, you may help him or her develop a better sense of saving for the future and assist with building a nest egg for his or her retirement. As long as the child earns money – at a summer job or even baby-sitting – you may contribute up to 100 percent of his or her earned income amount, or $5,500, whichever is less.

Registered broker/dealer offering securities products: COUNTRY® Capital Management Company, 1705 N Towanda Ave, PO Box 2222, Bloomington, IL 61702-2222, 1-866-551-0060. Member FINRA/SIPC

1$110,000 for single filers and $220,000 for joint filers.
2State contribution limits range from $146,000 to $305,000. Median limit is $235,000.

This article was prepared by COUNTRY Financial®.

Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. There are investment risks associated with investing in municipal fund securities. More information about municipal fund securities is available in the issuer's official statement. The official statement should be read carefully before investing.

The information contained here is general and should not be considered legal or tax advice. Laws of a particular state and your particular situation may significantly affect the general information presented herein. The availability of the tax or other benefits mentioned above may be conditioned on meeting certain requirements. You should consult your attorney or tax advisor regarding your specific legal or tax situation.