The
American Academy of Financial Management™ Journal
College
Savings Plans, Financial Aid, and Tax Strategy
Dean Richard Whiteside and Prof.
George S. Mentz, JD, MBA, MFP ™ Master Financial Professional
For years,
the annual rate of increase in the cost of a year of study at a college or university
has outpaced the rate of inflation. Today the cost of earning a college degree
has promoted the college purchase into second place, after a home, on the list
of most expensive purchases made by American families. For some families, the
cost of the college purchase may exceed even the cost of their home purchase!
The College Board reported that the average annual cost for one year of
study, living at home, at a four-year publicly supported institution was $13,463
for academic year 2002-03. The annual average cost of attending a private college
or university during 2002-03 amounted to $27,667. If the annual rate of increase
in these costs averages 5% in the future, the cost of a baccalaureate degree for
a child entering the first grade in September 2003 will reach approximately $104,000
at a public institution and just over $214,000 at a private institution. The financial
burden on families with more than one child is, and will continue to be, enormous.
Today's parents of young children are left wondering, will we be able to send
our children to college?
Concern over the cost of a college education isn't
new. Each generation of parents has wrestled with the problem. While today's costs
are higher than ever before, parents of prospective college-bound students now
have many more options at their disposal for dealing with these costs. In fact,
the sheer number of options and the complexity of some of them has given rise
to a whole new field of financial planning - financial planning for college costs.
Five key questions drive the financial planning for college.
1. How much
financial aid will be available?
2. Will we be eligible for need-based financial
aid?
3. How much will we pay from annual income?
4. How much will we pay
from savings?
5. How much will we finance?
Since the answer to any one
of these questions effects the answer to the remaining questions, any discussion
of college finance must focus on these five questions as a group. The information
needed to create a financing plan suitable for a particular family is extensive
but it can be categorized into broad categories for the purposes of gaining a
basic understanding of the available options. For the purposes of clarity, the
following categories will be discussed.
1. Financial aid programs
2.
Tax relief provisions for families experiencing educational expenditures
3.
Tax incentives for those wishing to save for educational expenses
These
categories are analyzed as they relate to the Financial Aid Process model shown
in the Illustration 1.
Financial
Aid Programs
Creating an effective strategy for financing a college education
requires some basic knowledge of the financial aid programs and processes currently
in place. While financial aid rules and regulations are numerous and complex,
families trying to formulate a college investment strategy only need to understand
the basic principles of the process. Two types of financial aid are available:
need-based financial assistance and merit-based financial assistance.
Merit-based
financial aid awards recognize the student's special skills or academic achievement.
In making these awards, institutions do not consider whether or not the funds
are needed by the student. The only consideration is the individual's special
abilities or achievements. Need-based financial aid involves an analysis of the
family's ability to pay for college with financial aid being awarded to cover
the portion of the cost of college that exceeds the family's capability. This
assessment of "need" involves the consideration of a number of factors
including the cost of a particular college, the family's income and the family's
assets.
Financial assistance can come in the form of grants, scholarships,
loans or work-study arrangements. Grants and scholarships represent a real reduction
in the cost of attending the institution and carry no obligations for repayment.
Educational loans come in many forms but they all share the requirement that the
amount borrowed plus interest must eventually be repaid. Work-based financial
assistance comes in the form of an hourly wage for services performed.
The
funds for these programs come from a variety of sources including the federal
and state governments, the colleges themselves, private organizations and scholarship
foundations. Funds from state or federal or state sources are administered in
strict compliance with the rules and regulations established by the federal government
and the state providing the assistance. In the case of funds from the federal
government, the rules and regulations apply uniformly to all residents of the
United States. Individual states are free to establish their own rules and regulations
for financial aid funded from state sources. Private organizations, individuals
and colleges are free to establish their own rules and regulations for the administration
of the funds they provide. As a result, a particular college student may have
to comply with several sets of financial aid rules and regulations. Although there
are differences in these sets of regulations, they have many commonalities - particularly
in the areas of calculating cost, determination of what a family can contribute
and the calculation of financial need.
The real cost of attending a college
includes what must be paid for tuition, student fees, living expenses, books,
transportation to and from the school and miscellaneous personal expenses. The
total of these for a particular college is called its "annual cost of attendance."
The living expenses for students choosing to live on-campus are represented by
the charges the college makes for room and board. The families of students living
at home do not experience the college's room and board charges but they do experience
a real cost in providing housing and meals for their college age children. The
annual cost of attendance budget recognizes these costs by using a "home
maintenance allowance" - an estimation of these costs - as an item in the
student cost of attendance budget. Tuition, fees, room and board are paid directly
to the college and represent a direct expense. The cost of books, transportation,
home maintenance and miscellaneous expenses are paid as incurred by the family
and represent indirect or out-of-pocket expenses. Regardless of whether the expense
is a direct or indirect expense it is still part of the real cost of going to
college and is therefore used in determining the student's annual budget.
Current
public policy defines college attendance as a voluntary activity. Unlike the elementary
and secondary educational opportunities that are provided on a cost free basis
to every U.S. resident, the costs associated with attending college, although
subsidized heavily by state and local governments, remains an obligation of the
student and their family. To make attendance possible, financial aid is provided
to help the family cover the portion of the cost of attendance that exceeds the
family's resources. This system requires that some method be employed to determine
what a particular family can afford to pay for college. This is called the family
contribution and includes both what the parent and the student can contribute
toward the cost of attending.
The United States Congress has developed
a methodology for determining the expected family contribution for those students
desiring to receive federally funded financial aid. This approach - the Federal
Methodology - is also used by many states in the administration of the programs
that they sponsor. The Federal Methodology is the only method that can be used
in determining eligibility for federally funded financial aid programs. In the
administration of financial aid funded by individual colleges or private parties,
those providing these funds may require additional information not considered
in the Federal Methodology. As a result, some colleges also employ an "Institutional
Methodology" in the determination of ability to pay. These institutionally
specific methodologies can be used only in the administration of the funds that
come directly from their own resources. An Institutional Methodology can never
be used in place of the Federal Methodology for determining eligibility for federally
funded financial aid programs.
In the Federal Methodology the parents'
and student's earning and assets are analyzed to determine the amount the family
can contribute toward the student's educational expenses. Families in stronger
financial positions are expected to contribute more than families with lower incomes
and fewer assets. It is difficult to provide an estimate of the expected contribution
based on income because the formula treats income and assets separately and because
the formula allows families to take "deductions" that vary by family
size, the state of residence, total taxes paid and the age of the older parent.
Illustration 2 provides a very rough estimate of the expected contribution based
on family income. For the purposes of Illustration 2 family assets have been excluded.
Illustration 2
Expected Family Contribution
Based on Parent
Income
Family of 4
One In College
Older Parent is 48 Years Old
Income
Estimated Contribution Income Estimated Contribution
$10,000 0 $75,000 $9,701
$15,000
0 $80,000 $11,096
$20,000 0 $85,000 $12,491
$25,000 0 $90,000 $13,973
$30,000
$80 $95,000 $15,513
$35,000 $876 $100,000 $17,054
$40,000 $1,672 $105,000
$18,594
$45,000 $2,467 $110,000 $20,134
$50,000 $3,342 $115,000 $21,675
$55,000
$4,369 $120,000 $23,215
$60,000 $5,652 $125,000 $24,717
$65,000 $6,912 $130,000
$26,187
$70,000 $8,306 $135,000 $27,657
The family contribution is
considered available to offset educational expenses. If there is only one child
in college the entire family contribution is considered to be available for the
use of that student. However, if more than one child is in college at any given
time, the contribution is divided equally among the students in college. Thus,
if three children from the same family are in college at the same time, the contribution
for each child is one-third of the total family contribution.
Many families
are shocked by the amount of the family contribution. When the contribution is
added to their fixed obligations for housing, cars and other goods and services
they often conclude that providing the amount specified on an annual basis will
be impossible. In today's economy, the family contribution is really an index
of the family's financial strength. The correct interpretation of family contribution
is that the amount represents the amount that the family can absorb, given its
current situation, in terms of cash payments or borrowing. Most American families
will come to realize that a college education is a financed purchase similar to
the purchase of a home or car although the item purchased is far less tangible.
Financial
need is defined as the difference between the cost of attendance at a particular
college and the family contribution. Because of the wide variation in the cost
of attendance at different types of institutions, student need varies widely.
Although cost varies from one institution to another, the family contribution
remains constant. As a result, a student may have no need at one institution but
demonstrate considerable need at another. For example, if the family contribution
is calculated to be $15,000 and the student attends a college with a cost of attendance
of $15,000, the student's need would be zero. However, if the same student selected
a college with a $35,000 annual cost of attendance the student would have $20,000
in need.
The objective of need-based financial aid programs is to provide
the student with access to the funds needed to meet demonstrated need. In the
best of all worlds, the institution would be able to provide the student with
all of the funds needed to meet this need. In reality however, many institutions
do not have access to sufficient resources to meet the needs of all students seeking
to enroll. When this is the case, the sum of the family contribution and the financial
aid offered by the college may amount to less than the cost of attendance. In
these cases there is a "gap" between available resources and cost. Such
gaps make attending that college more difficult.
A family can calculate
its own expected family contribution by using various financial aid calculators
that are available on the Internet. One of the most popular and useful websites
for financial aid information can be found at: http://www.finaid.org/. This comprehensive
financial aid site provides a wealth of information about scholarships, educational
loans, college savings plans and a series of "calculators" that allow
families to estimate their family contribution, loan repayment obligations, etc.
Tax Relief For Families With Educational Expenses
Federal tax
law changes that took place in 1997 and again in 2003 provide tax relief for families
with children in college. These mechanisms are most useful to families with students
currently enrolled in colleges or to those families with little time left to save
for college. The tax changes that took effect in 1997 and 2003 also included provisions
intended to motivate families to save for college. The savings options and benefits
are detailed in a subsequent section. In this section only the tax relief programs
are examined.
The various tax relief programs are describe briefly.
Hope
Credits
In 1997, the $1,500 HOPE program was created to make the first two
years of college universally available to all American families. For students
in the first two years of college taxpayers can claim a tax credit equal to 100%
of the first $1,000 of tuition and fees and 50% of the second $1,000. These amounts
are indexed for inflation after 2001.
The credit is available on a per-student
basis for net tuition and fees (tuition and fees less the amount of financial
aid received that is in the form of grants or scholarships) paid for college enrollment
after December 31, 1997. For 2003, the credit is phased out for joint filers with
between $83,000 and $103,000 of income, and for single filers with incomes between
$41,000 and $51,000 (indexed periodically). The credit can be claimed in two tax
years for any individual enrolled on at least a half-time basis for any portion
of the year.
Lifetime Learning Credits
In 1997, Congress created
the Lifetime Learning Credit for College Juniors, Seniors, Graduate Students and
working Americans pursuing lifelong learning to upgrade their skills. For those
beyond the first two years of college, or taking classes part-time to improve
or upgrade their job skills, the family will receive a 20% tax credit for the
first 10,000 of expenses. The credit is available for net tuition and fees (less
grant aid) paid for post-secondary enrollment. The credit is available on a per-taxpayer
(family) basis, and is phased out at the same income levels as the HOPE tax credits.
Note - there can only be one credit taken per child, either Hope of Lifetime Learning
but not both.
Student Loan Interest Deduction
The Student Loan Interest
Deduction provisions of the 1997 tax law changes allows for an "above-the-line
deduction" (the taxpayer does not need to itemize in order to benefit) for
interest paid in the repayment on private or government-backed loans used for
post-secondary education and training expenses. The maximum deduction is $2,500.
It is phased out for joint filers with incomes between $100,000 and $130,000,
and for single filers with incomes between $50,000 and $65,000 (indexed after
2002). The deduction is available for loans made before or after enactment of
the tax change. The loan amount eligible for the deduction is limited to post-secondary
expenses for tuition, fees, books, equipment, room, and board, and this tax break
has been extended beyond the original application to the first 5 years of repayment.
IRA
Withdrawals.
Taxpayers may withdraw funds from an IRA, without penalty, for
the higher education expenses of the taxpayer, spouse, child, or grandchild. The
amount that can be withdrawn without penalty is limited to net post-secondary
expenses (expenses less other forms of grant or scholarship financial aid) for
tuition, fees, books, equipment, and room and board.
Community Service Loan
Forgiveness
This provision excludes from taxable income loan amounts forgiven
by non-profit, tax-exempt charitable or educational institutions for borrowers
who take community-service jobs addressing unmet needs.
Saving
For College
In addition to providing tax relief, the recent tax code changes
also created several college savings mechanisms that receive favorable tax treatment.
These provisions should be of particular interest to those families who have several
years or more before their children begin to enroll in college.
One of the
key questions in formulating a college savings plan relates to the issue of whom
- the parent or the student- controls the savings account. In other words, to
who does the money really belong. Since savings accounts typically generate interest
and such interest may be taxed, many families decide to place the savings in the
student's name under the assumption that the student normally is usually in a
lower tax bracket than the parents. The second concern expressed by families revolves
around the question: if we do save won't these savings reduce our son or daughter's
eligibility for financial aid?
In the vast majority of cases, it is in
the long-term interest of the parents to maintain control over the savings earmarked
for college even though some of the interest earned may trigger increased income
tax liability. The existing needs analysis formulas provide a relatively favorable
treatment of parental savings when compared with the treatment of student savings.
In constructing the needs analysis formula, Congress recognized the simple fact
that parents should be saving "for their own future - for their retirement."
As a result, two provisions were established that impact how parental assets are
used in the determination of family contribution. The first provision establishes
an "asset protection allowance" that is determined by the age of the
older parent. The amount of the allowance is deducted from the total asset value
thereby reducing the overall value of the asset for needs analysis purposes. The
second provision involves the percentage of the remaining asset balance that enters
into the family's adjusted income. Currently this percentage is set at 12% of
the remaining asset balance. The 12% value is then added to the family's adjusted
income. The total adjusted income is then "taxed" using a sliding scale
depending upon the level of adjusted income. The highest marginal rate for parents
is currently 37% excluding state and non-federal taxation.
Student assets
are treated more harshly in the needs analysis formula. Congress determined that
the primary focus of college-age students should be on completing their education,
not providing for their long-term retirement needs. As a result, there is no asset
protection allowance provision for student assets. Furthermore, the percentage
of the student controlled asset considered available to underwrite the annual
cost of attendance is set at a flat 35% rate. Illustration 4 demonstrates how
these provisions impact eligibility for financial aid for a family with no assets,
a family with $100,000 in assts held in the parents' names and a family with $100,000
in assets held in the student's name. The table is constructed for families with
identical incomes attending the same institution.
As detailed in the illustration,
the asset held in the parent's name retains approximately 96% of its initial value
(assuming a 2% annual interest on the principal) after four years of deductions
for college expenses. When the asset is in the student's name less than 20% of
the original value remains in tact. Since many financial aid packages will also
include student loans, families with considerable assets are in a position to
reduce reliance on loans by choosing to utilize a larger percentage of the asset
value than is required by the Federal Methodology. This incremental use of assets
can reduce the family's reliance on student loans that will likely be a part of
the student's financial aid package.
Many families underestimate the power
of long-term savings. Even modest monthly savings beginning when a child is born
can create a sizeable asset to cover college related expenses. Illustration 3
shows the accumulated value of family savings for a newborn child (18 years of
savings prior to college entry) for interest rates between 2 and 5% annually for
monthly savings of between $50.00 per month and $700 per month. This analysis
assumes that the savings are in a tax-free investment vehicle and that the monthly
payment occurs on the first of each month.
Illustration 3
Savings
Calculator
Annual Interest Paid On Account
Amount Monthly 2% 3%
4% 5%
$50 $13,009 $14,333 $15,832 $17,533
$100 $26,017 $28,666 $31,664 $35,062
$200
$52.035 $57,331 $63,329 $70,131
$300 $78,052 $85,997 $94,993 $105,197
$400
$104,069 $114,622 $126,658 $140,263
$500 $130,086 $143,328 $158,322 $175,329
$600
$156,014 $171,993 $189,987 $210,394
$700 $182,121 $200,659 $221,651 $245,460
Illustration 4
Impact of Asset Value on Financial Aid Eligibility
No Assets $100,000 Parental Asset $100,000 Student Asset
Institution's Cost
of Attendance $25,000 $25,000 $25,000
Family income $75,000 $75,000 $75,000
Contribution
from income $9,701 $9,701 $9,701
Assets $0 $100,000 $100,000
Asset protection
allowance N/A $44,400 $0
Adjusted asset value N/A $55,600 $100,000
% of
asset used to supplement income N/A 12% 35%
Amount of asset available as a
supplement to income N/A $6,672 $35,000
Amount of supplement added to family
contribution at 47% of supplement N/A $3,136 N/A
Total family contribution
$9,701 $12,837 $44,701
Remaining need (cost less family contribution) $15,299
$12,163 ($19,701)
Asset value remaining after 4 years assuming no interest
growth * N/A $95,868 $19,322
% of asset remaining post college 95.87% 19.32%
.
* Analysis of Asset Depletion: Parent versus Student Asset
Parent Asset
Student's Year In College 1 2 3 4
Age of Older Parent
48 49 50 51
Asset Beginning Balance $100,000 $98,801 $97,711 $96,731
Annual
Interest 2% 2% 2% 2%
Asset Protection Allowance $44,400 $45,500 $46,700 $48,100
Adjusted
Net Worth $55,600 $53,301 $51,011 $48,631
Conversion at 12% $6,672 $6,396 $6,121
$5,836
Taxation Rate at 47% $3,136 $3,006 $2,877 $2,743
Revised Asset Value
$96,864 $95,795 $94,834 $93,988
Plus 2% Interest $98,801 $97,711 $96,731 $95,868
Percent
of Asset Remaining 95.87%
Total Cash Expenditure From Asset $11,762
Student Asset
Student's Year In College 1 2 3 4
Asset Beginning Balance
$100,000 $66,300 $43,957 $29,143
Taxation Rate 35% 35% 35% 35%
Used For
educational Expenses $35,000 $23,205 $15,385 $10,200
Remaining Asset $65,000
$43,095 $28,572 $18,943
Pus 2% Interest $1,300 $862 $571 $379
End of Year
Asset Balance $66,300 $43,957 $29,143 $19,322
Percent of Asset Remaining 66.30%
43.96% 29.14% 19.32%
Total Cash Expenditure $83,790
Given
the existing needs analysis methodology, the only time placing the money in the
student's name makes sense is when the parents are certain that their financial
situation is such that there is no way that the family will qualify for financial
aid - even at America's most expensive college and universities or if there are
estate planning considerations. In these situations a transfer of funds to the
student may be beneficial from the parents' tax standpoint.
Estate Planning,
Gifts, and Control
Unless you are wealthy (individual assets over $1 million
adjusted periodically for inflation), maintaining custody of the accounts holding
the funds for a child's educational expenses should not affect your estate plan.
Two types of accounts generally are at issue: interest bearing savings accounts
or investment accounts in the name of the child where a parent, guardian or third
party is the owner or custodian over the account until the child goes to college.
The value of any account over which you have custody is reflected in your estate,
if you name yourself custodian and you die while the child is a minor.
If
you and your spouse are worth over $1 million individually or cumulatively, you
may need to evaluate how you invest for a child or grandchild's education. Unfortunately,
the only way to reduce estate taxes is to reduce the size of your estate. One
of the most effective ways to accomplish that goal is through gifts. You can presently
give up to $11,000 ($22,000 with your spouse) per year to each of your children
tax free. In a sizeable estate taxed at 49%, that $22,000 in inheritance would
be reduced to just $11,220. Such annual gifts can be especially valuable (and
significant in reducing estate taxes) when they consist of appreciating assets.
You can also give more than this amount annually, but the gift(s) will count against
your Unified Tax Credit. However, you can pay college tuition directly to an institution
on behalf of a student without incurring gift taxes.
What are Custody Accounts:
Advantages and Disadvantages If your children are young or if you prefer that
they not have control of cash, you may want to consider establishing a custodial
account under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers
to Minors Act (UTMA). Under these provisions, gifts and investment earnings can
accumulate under your supervision as custodian. As a note, state laws affect this
type of account, and your child may have rights to these investments at age eighteen
or twenty one (age of majority). Keep in mind that the kiddie tax laws may apply
here and unearned income may be subject to the parents tax rate until age 14.
529
Plans (Section 529 of the Internal Revenue Code)
A 529 is an investment plan
operated by individual states that are designed to help families save for future
college costs. As long as the 529 Plan meets basic requirements, the federal tax
law provides special tax benefits to you.
Each state now has at least one
529 Plan available. Section 529 of the IRS code provides for the establishment
of two types of college financing instruments: either prepaid tuition or college
savings plans. (Some states offer both options.) Some states offering prepaid
tuition contracts covering in-state tuition may allow you to transfer the value
of your contract to private and out-of-state schools. However, you may not receive
full value in these kinds of transfers. If you use a 529 savings program, the
full value of your account can be used at any accredited college or university
in the country (and even some foreign institutions). Both types of 529 financing
plans are funded through "after tax dollars." See Illustration 7 for
a summary of the 529 Plans sponsored by each state.
A 529 plan investment
grows tax-free for as long as your money is within the plan. When you allow a
distribution to pay for the beneficiary's college costs, the distribution is federal
tax-free as well. This applies for distributions in the years 2003 through 2010.
Unless Congress extends this tax code provision, 529 distributions made after
2010 will be taxable to the beneficiary (i.e. only gains above the principal originally
invested).
The big benefit is that the donor stays in control of the 529
Plan account. With few exceptions, the named beneficiary has no rights to the
funds.
The U.S. Department of Education maintains that 529 savings accounts
are treated as a parent's asset in determining eligibility for federal financial
aid. Thus, the expected contribution towards your child's college costs is subject
to the same treatment as are other parental assets - treatment far more favorable
than if the funds are under the ownership of the student.
Since individual
institutions are free to develop their own methodology for awarding financial
aid funded by the institution (as opposed to financial aid programs funded by
governmental agencies), some institutions may decide to treat 529 Plan assets
differently when determining eligibility for institutionally funded financial
aid.
529 Prepaid tuition plans have a much greater impact on financial
aid eligibility. Distributions from 529 Prepaid Tuition Plans reduce financial
aid eligibility dollar for dollar. Thus, if your prepaid tuition contract pays
out $5,000 in tuition benefits this year, the student will be considered as having
$5,000 less need for financial aid.
Upon the completion of a beneficiary's
education, the balance in a 529 account reverts to the owner of the 529 account.
This will trigger a tax event on the accumulated earnings for the account owner.
Details
regarding the 529 plans offered by each state can be found on the Internet. The
most comprehensive sites can be found at: http://www.savingforcollege.com
and
http://www.collegesavings.org.
Coverdell Accounts
What used to be called
the Education IRA (established in 1997) is now titled the Coverdell Education
Savings Account (ESA). In 2002, the contribution limit increased from $500 per
child to $2,000 per child. However, if accounts that are established by different
family members for the same child cause the total contributions to exceed $2,000,
a penalty may be owed.
The parents' after tax contribution goes into an
account that will eventually pass to the named child if the funds are not used
for college expenses. Unlike unused funds in most 529 plans, the donor cannot
reclaim these funds. Since the annual contribution limit is low, the level of
fees and charges to maintain this type of account should be a major concern when
selecting the company to manage the Coverdell IRA. In general, Coverdell accounts
must be fully withdrawn by the time the beneficiary reaches age 30, or else it
may be subject to tax or penalties
Funds in a Coverdell account are considered
an asset of the student, not the parent, for financial aid purposes. Under the
existing federally mandated financial aid needs analysis system, 35% of a student's
assets are considered additive to the student's contribution from income. Therefore,
if the value of a Coverdell is $20,000, the impact on the student's eligibility
in the first year of attendance would be $7,000 or 35% of the total account value.
Two notes of interest here are that these types of accounts may be phased out
for singles earning 95-110 thousand and Joint Filers earning 190-220,000 dollars.
Moreover, these accounts may be eligible for used for elementary or secondary
expenses.
Conclusion
Although college is more expensive than ever
and college costs are growing at a rate faster than inflation, today's families
have many more options to use in creating a financial plan for funding the college
experience. Creating the best financial plan for your family means tailoring the
use of these options to your specific needs and capabilities. This design begins
with a clear understanding of how all of the component parts of the college finance
system function. Illustration 5 provides a graphic representation of how various
savings mechanisms play into the financial aid process.
Illustration 6
provides a comparative analysis of the different types of college savings instruments.
The key elements to evaluate are:
1. Whether your family will qualify
for financial aid
2. If your family will qualify for financial aid, you probably
want to keep the savings asset in the parents' custody. This strategy will reduce
the impact that college savings will have on financial aid eligibility. Coverdell
and 529 plans allow parents to save for college without having to pay taxes on
the account earnings.
3. If you will not qualify for financial aid, there may
be clear tax advantages to placing the college savings asset under the student's
control. This strategy will normally reduce parental tax liability. (However,
if the savings are in the form of Coverdell IRAs or a 529 Plan, the interest earned
by the custodian (the parent) is non-taxable.)
4. If exposure to estate taxes
is a concern, the Uniform Transfers to Minors Act (UTMA) or the Uniform Gift to
Minors Act (UGMA) may provide an advantageous option for reducing estate tax exposure.
5.
Even if there is no likely exposure to estate taxation, families who will not
qualify for financial assistance may experience tax advantages by annual gifts
up to the maximum allowed by law.
*Note - This document does not
claim to give investment, tax nor legal advice. All tax rules or quoted numbers
can be changed or indexed by the government at any time. Some phase out salary
information in this document may be based on MAGI or AGI. Moreover, some of these
tax breaks have sunset provision in which they may expire in a few years. Please
consult with a licensed tax, legal, or investment professional before making any
important decision or any decision related to this document. Advice herein is
subject to the academic exemption for research. All Rights Reserved 2003
About Prof. Mentz:
Prof. Mentz is first person in the United States to
achieve "Quad Designations" as a JD, MBA, licensed financial planner,
and Certified Financial Consultant. Mr. Mentz is presently serving as President
and Professor for The American Academy of Financial Management ™. Mr. Mentz has
consulted with Wall Street Firms, trained hundreds of financial advisors, and
instructed several hundred clients on educational savings, tax strategy, and estate
planning. Mr. Mentz is a Licensed Attorney and Counselor of Law (LA), and has
researched and published worldwide in the area of taxation, financial analysis,
investments, estate planning, and financial consulting. Mr. Mentz is presently
an adjunct faculty member for Several Universities teaching online and on-site,
and he has published, written, and presented multiple articles and research in
venues such as print, magazine, journals, television, college campuses. Mr. Mentz
has prior experience as a Senior Financial Planner and Wealth Management Advisor
for a Wall Street Firm providing training and research on educational investing.
He holds the MFP™ Master Financial Professional Credential and the CWM™ Chartered
Wealth Manager Credential.
The
Global Journal For International Financial Analysts (JIFAM) is a scholarly, peer
refereed finance journal that provides a forum and means for exchanging information
on the social impact of information technologies. JIFAM's scope includes the effects
of Financial Management on business, family, socialization, entertainment, and
education. The Journal publishes original research articles, short experimental
reports, review monographs, technical notes, as well as special, thematic issues
with commentaries.
Types
of manuscripts:
The Finance Journal considers for publication full-length
articles and short-length articles of 1000 to 2000 words. Short-length articles
can generally be published sooner than full length articles. All material submitted
will be acknowledged on receipt. Full-length articles are subject to peer review.
Copies of the referees' comments will be forwarded electronically to the author
along with the editor's decision.
Copyright:
No
finance journal article can be published unless accompanied by a signed publication
agreement, which serves as a transfer of copyright from author to the JIFAM Journal.
A publication agreement may be obtained here. Only original papers will be accepted
and copyright in published papers will be vested in the publisher. It is the author's
responsibility to obtain written permission to reproduce material that has appeared
in another publication.
Format
of submitted material:
All
manuscripts must be submitted electronically in one of the following formats:
Html, ASCII, RTF Microsoft Word, Wordperfect. The beginning of the manuscript
must bear the title of the paper and the full names of the authors as well as
their affiliations, full postal and e-mail addresses. In the case of multiple
authors, please indicate which author is to receive correspondence. Financial
support may be acknowledged within the article to avoid footnotes. A list of keywords
along with an informative abstract of 200 words or less is required for full-length
articles.
Style:
In
general, the style should follow the forms given in the Publication Manual of
the American Psychological Association (Washington, DC: 1994).
Organization:
In
general, the background and purpose of the article should be stated first, followed
by details of the methods, materials, procedures, and equipment used. Findings,
discussion and conclusions should follow in that order. Appendices are not encouraged.
The APA Publication Manual should be consulted for details as needed.
Figures:
Figures
should be kept to a minimum and be used only when absolutely necessary. They should
be prepared and submitted in one of the following forms: JPEG File Interchange
(jpg), Compuserve GIF (gif), Windows Bitmaps (bmp), Tagged Image File (tif), PC
Paintbrush (pcx). In any case images should not exceed width of 450 pixels.
Bibliography:
The
accuracy and completeness of the references is the responsibility of the author.
References to personal letters, paper presented at meetings, and other unpublished
material may be included. If such material may be of help in the evaluation of
the paper, copies should be made available to the Editor. Papers which are part
of a series should include a citation of the previous paper. Explanatory material
may be appended to the end of a citation to avoid footnotes in text. The format
for citations in text for bibliographic references follows the Publication Manual
of the American Psychological Association (4th ed., 1994). Citation of an author's
work in the text should follow the author-date method of citation; the surname
of the author(s) and the year of publication should appear in text. For example,
Paisley (1993) found that...
Recent research has shown that...(Schauder, 1994)
In other work (Gordon & Lenk, 1992; Harman, 1991)...
Examples
of citations to a journal article, a book, a chapter in a book, and published
proceedings of a meeting follow:
Buckland, M., & Gey, F. (1994). The
relationship
between recall and precision. Journal of the
American Society
for Information Science, 45, 12-19.
Borgman, C.L. (Ed.). (1990). Scholarly
communication and bibliometrics. London:
Sage.
Bauin, S., & Rothman, H. (1992). "Impact" of
journals as proxies
for citation counts. In P.
Weingart, R. Sehringer, & M. Winterhager (Eds.),
Representations of science and technology (pp.
225-239). Leiden: DSWO Press.
In
case of any question about bibliographic forms, refer to the Publication Manual
of the American Psychological Association, 4th edition, Washington, DC, 1994.
Copies may be ordered from: APA Order Department, P.O. Box 92984, Washington,
DC 20090-2984, USA.
****************************************************
*
The Global Journal of International Financial Analysts (JIFA) *
* IZZZ 1095-139X
* 2000
* *
* ANNOUNCEMENT / CALL FOR PAPERS *
****************************************************
The
Global Journal of International Financial Analysts (JIFAM) is a scholarly, peer
refereed journal that provides a forum and means for exchanging information on
the social impact of information technologies. JIFAM's scope includes the effects
of information technology on business, socialization, entertainment, and education.
The Journal publishes
original research articles, short experimental reports,
review mono- graphs, technical notes, as well as special, thematic issues with
commentaries.
The
Global Journal of International Financial Analysts (JIFAM) is unique in providing
a diverse forum for those interested in the effects of theories or implementation
of information technology. It, therefore, promotes an exchange of information
between groups
not always thought to share a common interest. In general,
JIFAM is designed for the following audiences: researchers, developers, and practitioners
in schools, industry, and government; administrators, policy decision-makers,
and other specialists in computer information systems.
Authors
are invited to submit high quality papers that match the Journal's scope. The
Journal considers for publication full-length articles and short-length articles
of 1000 words or less. Short-length articles can generally be published sooner
than full length articles. All manuscripts must be submitted electronically. Authors
should simply submit their articles in their standard culturally accepted form.
ARTICLE
SUBMISSIONS
