Call Now for an Appointment (973) 383-7415
oseph M. Hoffmann, Esq.
Attorney at Law
Wills, Trusts, Estates & Planning
21 Main Street, Newton, NJ 07860
  J
2012 Joseph M. Hoffmann, Esq. All Rights Reserved
 
Saving and Paying for College
 
 
 
  529 SAVINGS PLAN
COVERDELL ED.
SAVINGS ACCOUNT
U.S. EE & I BONDS
UNIFORM GIFT TO
MINORS
MINORS 2503B
TRUST
MINORS 2503C
TRUST
INVESTMENT CONTROL
 State or College
 Donor
 Government
 Custodian
 Trustee
 Trustee
 
INCOME CAP TO SETUP
 No
App. $110,000
AGI Single Filer
App. $110,000
AGI Single Filer
 No
 No
 No 
 
MUST PAYOUT AT 21
 No
 No
 No
 No
 Yes 
 No
 
SUBJECT TO
KIDDIE TAX
 No
 No
 No
 Yes
 Yes
 Yes
 
QUALIFIES FOR
GIFT TAX DEDUCTION
 Yes
 Yes
 No
 Maybe
 Maybe
 Maybe
 
MAXIMUM ANNUAL
CONTRIBUTION
 $60,000 Over 5 Years
 $2,000 per Student/Year
 No
 None
 None
 None
 
MUST BE USED
FOR QUALIFIED
ED. EXPENSES
 Yes
Higher Education
 Yes
K-12 & Higher Education
 No
 No
 No
 No
 
SCHOLARSHIP IMPACT
 Yes
 Yes
 Yes
 Yes
 Yes
 Yes
 
CAN DONOR GET IT BACK?
 Yes
 No
 Yes
 No
 No
 Yes
 
BENEFICIARY GETS $ AT 21
 No
 Yes
 No
 Yes
 Yes
 Maybe
 
OWNER IF BENEFICIARY DIES
 Donor
 Estate or
 other Student(s)
 Parent
 Students' Estate
 Students' Estate
Owner, Estate or New Heir
 
PENALTY FOR NOT
SPENDING ON EDUCATION
 10% + Tax
 10% + Tax
 Tax
 None
 None
 None
 
INCOME TAX TREATMENT
 Generally Interest
 is Tax Free
Generally Interest
 is Tax Free 
 Qualified Ed. Exp.
 Tax Free
 Income is
 Taxable Yearly
 Income is
 Taxable Yearly
 Income is
 Taxable Yearly
 
 
 
 
 
           
 
 
529 Plans
These educational savings plans are run by the State and colleges. You should visit
www.njbest.com. The savings accounts can be front-end loaded up to $60,000.00 by
using the five-year election. The money grows tax-free and amounts paid out for
qualified educational expenses are also tax-free regardless of income. The beneficiary of
the account can be changed to a different student or family member. There is no tax
deduction on making the deposits and the money can return to the original donor but it
would be subject to income tax plus a 10% penalty.

Coverdell Educational Savings Plan
You can deposit up to $2,000.00 per student per year provided a single tax payer's income
is less than approximately $110,000.00. The account does not pay income tax on the
interest that it earns and qualified educational expenses are received tax-free. You cannot
get the account back but you do control the investments.

Uniform Transfer to Minors N.J.S.A. 46:38A
Money can be given to a minor to held by a custodian which is typically a parent. The
money can be used for education or other legitimate purposes but it becomes the student's
money at age 21. The interest on the money is taxable.

U.S. EE & I Bonds (Patriot Bonds)
If these bonds are in a parent's name and used for qualified educational expenses and
issued after 1990 and the owner's adjusted gross income is less than approximately
$110,000.00, the interest is not taxed. However, you must file Form 8815.

Minors Trust 2503c
The trust can hold any asset and generally qualifies for the Federal Gift Tax Deduction.
However, the child owns the money at age 21.

Minors Trust 2503b
This trust is called an income trust and can only have one beneficiary. All annual income
must be distributed to the beneficiary but the trust does not have to termite at age 21 and
can have different residual beneficiaries.

Kiddie Tax
Unearned income received by a child under 18 or a student up to age 23 is taxed. The first
$900.00 is tax-free. The second $900.00 is taxed at the student's rate and any income over
$1,800.00 is taxed at the parent's highest rate. The income must be disclosed on IRS Form
8615.

Scholarship Impact
All of the college type savings plans and assets impact a student's eligibility for
scholarships and Financial Aid.
 
 

This is a general outline. Please be sure to review actual rules & changes with us.
 
 

Law Offices of Joseph M. Hoffmann
Attorney at Law
21 Main Street
Newton, New Jersey 07860
973-383-7415
Joseph M. Hoffmann, Esq. is a Lawyer who represents clients in New Jersey and serves:
All of Northern NJ including: Sussex County | Warren County | Morris County | Passaic County | Somerset County | Union County | Newton | Andover | Sparta | Branchville
Morristown | Vernon | Sussex | West Milford | Hopatcong | Rockaway | Dover | Mt. Olive | Hackettstown | Randolph |
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Our Services
Estate Planning
Special Trusts
Corporation, LLCs, and LPs
Pet Trust
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Why Write A Will
NJ Municipal Court Tickets Plea Bargain
Dissolving A NJ Corporation
Tax Assessment Appeals
Suing Government Entities
Medicaid Eligibility
Choosing Executor(s)
Guardianship Costs & Proceedings
What Is Probate?
Information Required for Probate
Obtaining an Identification Number for a Business or Estate
Bounced Checks
Saving and Paying for College
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