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Old 12-15-2009, 12:47 PM   #21
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Ugh! That doesn't sound good! So, dad loses his job while junior and sis are in highschool and you can't make tax free withdrawals to pay for books, computers, band uniforms, etc.? Hard to justify not using both 529b plans and Coverdells based on that situation.
Doesn't the Coverdale cover that situation as well? And, if daughter was using a private music tutor pre-Julliard, Coverdell funds would have applied.
No need to be sarcastic...... Isn't that why folks should have an emergency account? I never said Coverdell IRAs are bad, they just have limits. Most grandparents I know are concerned about SECONDARY education with regards to gifting out of their estate. They figure high school is the paren'ts job and responsibility to pay for..........

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I understand why professional money managers frown on do-it-yourself plans like Coverdells, but I really think there is a workable strategy to harvest the benefits of both and maximize the benefit to the child. I do admit, however, that with a Coverdell, you don't get to be anyone's "client."
Actually, a Coverdell is just a kind of IRA account, so any FA in America can open one. If you are a fan of Coverdells, knock yourself out...... I was jus trying to help the OP, I didn't think you wanted to pick a fight with me about it.........
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Old 12-15-2009, 01:02 PM   #22
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No need to be sarcastic...... Isn't that why folks should have an emergency account? I never said Coverdell IRAs are bad, they just have limits. Most grandparents I know are concerned about SECONDARY education with regards to gifting out of their estate. They figure high school is the paren'ts job and responsibility to pay for..........



Actually, a Coverdell is just a kind of IRA account, so any FA in America can open one. If you are a fan of Coverdells, knock yourself out...... I was jus trying to help the OP, I didn't think you wanted to pick a fight with me about it.........
OH..... maybe I misunderstood. It sounded like you were recommending 529b's over Coverdells in an "all or nothing" recommendation. But now I understand you're agreeing with me that each has its pros and cons and the investor needs to investigate both to determine the percentage of resources to invest in each.

I understand your point of view.

edit: Just for clarification and to avoid confusion for others, didn't you mean "post secondary" above? 529b's cannot be used for secondary education.
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Old 12-15-2009, 01:10 PM   #23
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OH..... maybe I misunderstood. It sounded like you were recommending 529b's over Coverdells in an "all or nothing" recommendation. But now I understand you're agreeing with me that each has its pros and cons and the investor needs to investigate both to determine the percentage of resources to invest in each.

I understand your point of view.
Actually, I would like to throw another idea in, but some may find it too much work.

Set up the following;

1)Custodial account: A great place for cash gifts from relatives, cash for doing chores, etc. Parents can kick in some money for good behavior or good grades or whatever. It can become a help in college as kids always need money for this and that.

2)Educational IRAs: Particularly if the parents attended a private school or academy, and want their kids to have the same experience. Also can help with computers, tuition, books, etc for academies like Julliard, etc.

3)529 Plans: These are big with grandparents, as you can gift a lot of money to them and they are an estate planning tool, as the money goes out of the grandparent's estate. Also, it does not figure into the financial AID calculation in a negative as much as a custodial account would.......

In our case, DW and I were funding 529 accounts for the kids. We had pretty healthy balances because we put a lot in early on. When my late sister died, she left her 403B to the kids. As a beneficiary IRA, the annual RMD's are automatically sold out and the money electronically transferred to their custodial accounts. So, in effect, they will have a 529, a custodial account (not a large amount of money), and their aunt's IRA which she requested go to secondary schooling........
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Old 12-15-2009, 01:56 PM   #24
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Nice summary FD.
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Old 12-15-2009, 02:42 PM   #25
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Keep in mind Coverdells are set to undergo changes after 2010 unless Congress acts. Please take a look before you decide.
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