529 for a niece?

[Gwydion]

My brother sent out an email today asking if we would sign up for Upromise, an organization that will give you money back for buying things at specific stores. I have done as much research as I can and it seems to be a good deal. Most people only end up with $1000 or so after 18 years of using, but one way or the other, it seems to be a legit way to save money.

But I don't really have an interest in participating. I don't like my credit card being tied to things I don't really have control over. And I am incredibly cautious when I put my credit card information out there.

So here is the deal. My brother is a single dad that works his ass off to make ends meet. Unfortunately, he has a lot of bills and he can't really contribute much to his daughter's future. He does his best, but I don't want to see her decide college isn't an option due to financial obligations.

I would like to give her money that she can't use until she is heading off to college. But I don't know where to start. I don't really want to write my brother a check because I'd rather it not enter his account. While I know he would try to get that to his daughters savings account, I think finding a way to desginate it as a college fund would be more appropriate and something that his daughter, when she gets older, can see and understand it is for college.

Any thoughts/ideas would be appreciated.

She is 5 years old now.

 

[Chasey_Lane]

Why not start a savings account or something else of your choice for her now? You don't have to tell anyone about it, not even your brother. When she's 18 surprise her and tell her you'll be glad to help pay for school, but she will not be given the money directly. Instead, you'll pay for her tuition, books, labs, etc. without her having to ever see/have access to the money.

 

[desertrat]

Why not start a savings account or something else of your choice for her now? You don't have to tell anyone about it, not even your brother. When she's 18 surprise her and tell her you'll be glad to help pay for school, but she will not be given the money directly. Instead, you'll pay for her tuition, books, labs, etc. without her having to ever see/have access to the money.

She would need to know before that in order to take the right courses in HS.

 

[Chasey_Lane]

She would need to know before that in order to take the right courses in HS.

Not necessarily, but it would help I'm sure.

 

[jetmonkey]

I can think of easier ways to make $1K in 18 years, lols.

 

[bcp]

Maryland college savings plan is a 529.
check that out for her.
I put a semi large chunk into one with BBandT a while back for my daughter.

You dont pay tax on them when you take the money out as long as it is going to a college. If its used for other reasons then the account is taxed.

 

[leonardtowngal]

How about savings bonds?

 

[ohstate]

If he's participating in U-promise, he's probably already got a 529 set up for her. You can make contributions to that directly if you don't want to use upromise.

I've been using upromise for a few years now with no issues. Since I do so much of my shopping online, it can add up. You can also participate without giving them your credit card, IIRC. You can put in things like your Giant or CVS bonus card number and then when you buy items from certain manufacturers at those stores, they put a portion of the cash into the account. However, shopping through the UPromise shop link works for me.

 

[bcp]

How about savings bonds?

you pay tax on them when you use them.

 

[Gwydion]

Thanks for the responses. I emailed my brother back and basically told him that I would love to contribute, but not via Upromise.

bcp, or anybody, do you know if I, not being the creator of the 529 nor her parent if I can contribute to the one my brother set up for her?

 

[Woodyspda]

Thanks for the responses. I emailed my brother back and basically told him that I would love to contribute, but not via Upromise.

bcp, or anybody, do you know if I, not being the creator of the 529 nor her parent if I can contribute to the one my brother set up for her?

bcp, I would talk to a financial advisor. The one thing you want to make sure is that limits aren't exceeded by a combination of contributors.

I've seen where grandparents contribute to a 529 as well as the parents and it ends up being a mess when they don't communicate.

I can give you the number to someone who is very qualified to give you information in this area. Initial consultation is free... PM me if you want to know how to contact her.

PS. You may find out that a 529 isn't necessarily the best option... although from experience I'd say it is the wisest way to go tax wise.

 

[bcp]

bcp, I would talk to a financial advisor. The one thing you want to make sure is that limits aren't exceeded by a combination of contributors.

I've seen where grandparents contribute to a 529 as well as the parents and it ends up being a mess when they don't communicate.

I can give you the number to someone who is very qualified to give you information in this area. Initial consultation is free... PM me if you want to know how to contact her.

PS. You may find out that a 529 isn't necessarily the best option... although from experience I'd say it is the wisest way to go tax wise.

I have an accountant. but thanks.
and, everyone is going to be different depending on their needs, plans, income etc... Ive been using the same accountant now for almost 22 years, has not steered me wrong yet.

 

[GWguy]

How about savings bonds?

you pay tax on them when you use them.

No, not if they are used for education.
Individual - EE/E Savings Bonds

Tax Considerations

* Interest earnings are exempt from State and local income taxes, but are subject to Federal, State, and local estate, inheritance, gift, and other excise taxes.
* Interest earnings are subject to Federal income tax.
* Interest earnings may be excluded from Federal income tax when bonds are used to finance education (see education tax exclusions). Restrictions apply.

 

[Woodyspda]

I have an accountant. but thanks.
and, everyone is going to be different depending on their needs, plans, income etc... Ive been using the same accountant now for almost 22 years, has not steered me wrong yet.

An accountant is NOT a financial planner/analyst/banker/broker or otherwise unless they are licensed as such. I have yet to meet CPA who has the time to get those qualifications beyond their already strenuous training. I agree on everyone being different though.

 

[Woodyspda]

No, not if they are used for education.
Individual - EE/E Savings Bonds

Excessive income will negate the tax savings. There is a point where some people make too much money to take advantage and as stated by bcp previously his and everyone else's situation is different.

529's are going to be dinosaurs soon. The government loses too much in taxes because of them. They will eventually be extinct... too good to pass up in the meantime.

 

[GWguy]

Excessive income will negate the tax savings. There is a point where some people make too much money to take advantage and as stated by bcp previously his and everyone else's situation is different.

529's are going to be dinosaurs soon. The government loses too much in taxes because of them. They will eventually be extinct... too good to pass up in the meantime.

On the part of the niece ?

From a strictly investment/savings point of view, you can't do much better right now. I-series bonds are getting 5.64% through April 30, 2009. I bought some last month and the rate was only 4.8%.

 

[Gwydion]

On the part of the niece ?

From a strictly investment/savings point of view, you can't do much better right now. I-series bonds are getting 5.64% through April 30, 2009. I bought some last month and the rate was only 4.8%.

Side note, thats what I am doing as well. Although I got in a 3 month CD at 3.78%....still a hell of a lot better than the .5% I was getting having my cash sit in a bank.

 

[w1llsterl1]

If you want to contribute to a 529, and are a Maryland resident, you will only want to use the T Rowe Price college savings plan. You can deduct up to $2,500 of contributions on your Maryland tax return. Any contributions in excess of $2,500 can be carried forward for up to 10 years. They don't have any sales charges or 12b-1 fees, and very competitive performace and expenses.

If your financial advisor advises you to use any other plan he is more concerned with lining his own pocket than helping you plan for college.

You probably won't need to worry about hitting the 529 contributions cap. It is $60,000 per person over any 5 year period, and somewhere around $250k in total contributions over the life of the account.

Also, if you qualify, consider using a Roth IRA. Principal can be withdrawn at any time penalty and tax free, and if the kid doesn't go to college you can use the money for your retirement. Also, the Roth IRA balance in most instances won't hurt you in financial aid calculations.

I-bonds could be a pretty attractive investment, all the money the government is pumping into the system should cause inflation to rear its ugly head again.

Hope that helps.

 

[jsouthan]

If you want to contribute to a 529, and are a Maryland resident, you will only want to use the T Rowe Price college savings plan. You can deduct up to $2,500 of contributions on your Maryland tax return. Any contributions in excess of $2,500 can be carried forward for up to 10 years. They don't have any sales charges or 12b-1 fees, and very competitive performace and expenses.

If your financial advisor advises you to use any other plan he is more concerned with lining his own pocket than helping you plan for college.

You probably won't need to worry about hitting the 529 contributions cap. It is $60,000 per person over any 5 year period, and somewhere around $250k in total contributions over the life of the account.

Also, if you qualify, consider using a Roth IRA. Principal can be withdrawn at any time penalty and tax free, and if the kid doesn't go to college you can use the money for your retirement. Also, the Roth IRA balance in most instances won't hurt you in financial aid calculations.

I-bonds could be a pretty attractive investment, all the money the government is pumping into the system should cause inflation to rear its ugly head again.

Hope that helps.

We have the MD 529 plans for our kids. They have done pretty well historically, although they have taken a bit of a beating this year, as has anything in the stock market/mutual funds. We set up the account ourselves, but put them in my husband's name because if for some reason the first child does not need the money in the 529 (scholarship, etc.), then it can be transferred to the second child. I'm not sure how this works for someone who is a non-custodial child or if it would have to be put in your brother's name. Also, something else to note is that whatever monies are deposited in the 529 are tax-deductible in MD for the person whose name is on the account, regardless of who deposited the money. They do make it very easy for others to contribute, however. We have deposit slips that we can give to grandparents whenever they ask and anyone can set up direct deposit.

Kudos to you for looking out for your niece. If you ever need a couple of other kids to take on, let me know.