X hits on this document

1225 views

0 shares

0 downloads

0 comments

168 / 367

154

CHAPTER 9

their own name, invest in a fully taxable account under their child’s (or other minor, such as a grandchild) name, or invest in an Educa- tion IRA. All four of these plans have their own advantages and dis- advantages. We discuss these three options in this chapter, but focus the majority of our discussion on the new Section 529 Plan.

INVESTING UNDER THE INVESTOR’S NAME

Let’s assume you are a parent who wants to save money for your child’s education. You have started early; so early, in fact, that your child has yet to be born! Your only option for this money is to invest it under your name. In this case, we assume you have invested $5000 in an equity mutual fund. There are advantages and disadvantages to this. First, any income distributed by your investment will be fully taxable to you. Therefore, any capital gains and dividends from the fund will be taxed. However, because the money is in your name, you have complete control over it. So, you can redeem your fund shares and use the money for whatever you want, not just education.

Continuing with the example, let’s say your child grows up and decides he or she doesn’t want to attend college. Your initial $5000 investment has grown to more than $50,000. Had your child decided to attend college, you would have used this money to help pay for

Investing under the investor’s name

Initial investment = $5000

$5000

= $50,000

Son

= Backpacking in the Himalayas

$50,000

= Car

The money can be used for whatever the investor wants. It does not revert to the minor.

Document info
Document views1225
Page views1225
Page last viewedSat Jan 21 02:35:43 UTC 2017
Pages367
Paragraphs4568
Words116968

Comments