Quarterly Update
By Chris Cassidy, CEO
My life changed dramatically in January with the birth of my daughter. Despite a few sleepless nights and some messy diapers, I absolutely love being a dad.
One night while lying awake in bed, after changing a diaper, I decided to grab my computer and go to the 529 Plan College Savings Network website (collegesavings.org). On the website, I discovered a College Cost Calculator whereby an individual can input their child’s age, an assumption for college cost inflation (the site recommended 6%), the type of college and whether the cost calculation should include tuition only or also room and board. I decided to do the calculator for my daughter to estimate what college might cost for her in the future. I was stunned.
According to the cost calculator, a private college would cost $498,329 for tuition and fees only. When room and board was included, the cost jumped to $671,983.
If I was having difficulty sleeping before knowing this information, now I was really in trouble!
Thankfully, in 1996, Congress enacted Section 529 of the Internal Revenue Code, which established federal tax rules for 529 College Plans. According to the 529 Plan College Savings Network, over 12 million families have used these plans to save more than $250 billion. People use these plans because of the significant tax benefits that they provide. For example, 529 Plans grow tax-free assuming the withdrawals are used for approved education purposes. Furthermore, more than 30 states offer tax credits or deductions on deposits made to 529 Plans.
Based on these benefits, I recently set up a 529 Plan for my daughter and will do my best to fund it over the next twenty years. My colleague, Livia DeMarchis, having three children of her own, also has 529 Plans.
Livia is a very knowledgeable estate planning attorney by trade, and she has been a wonderful addition to Trust Company of Vermont. She understands complex estate planning documents and has extensive fiduciary tax knowledge. Livia has written an article this month on 529 Plans, which can be an important financial planning and estate planning tool. Although Trust Company of Vermont does not manage 529 Plans, we can help clients to understand their benefits and can assist with transactions and reviews.