Education and Custodial Savings and Brokerage Accounts
One way to seek college savings for a family member or even yourself is to open an education-specific savings account with Matisse. In addition to creating a place to save money, these accounts can offer tax benefits and are available in a variety of types.
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529 Savings Accounts
529 Savings Accounts can be an easy way to start saving for education costs for your children or other family members. These accounts are available to almost anyone, regardless of what state you live in, your age, or your income.
Not only do 529 Savings Accounts have high contribution limits, but they also allow you some control over the investments in your portfolio (two times per calendar year as authorized by the IRS). Unlike a Custodial Account, you can also change beneficiaries and make withdrawals as the account manager.
529 Savings Account Advantages
- Higher contribution limits than typical Education Savings Accounts
- Potential tax advantages
- More control over your investments
- More flexibility to change beneficiaries and make withdrawals
Please note:
New federal tax law expands the qualified use of 529 Savings Accounts. Withdrawals may now be used for K-12 tuition expenses, limited to $10,000 per year, per beneficiary. Individual state laws may not adopt this expanded definition for withdrawals, so clients should consult their tax advisor to learn more about their state's allowances.
529 Savings Account Application Checklist
It's helpful to have the following information on hand before you begin:
- The Social Security number, date of birth, and address of your designated beneficiary.
- Your Social Security number and date of birth, and the same for any joint account owner.
- If you are setting up automatic deposits, you will need bank account information, including bank routing number, account number, and phone number.
- If you're planning to fund your 529 Savings Account from your brokerage account, you'll need to have your brokerage account number ready, and be sure that your brokerage account has checking features included.
Common Questions
The information presented in Common Questions is for the purpose of general education and does not address the investment nor legal considerations of any individual. The opinions are of Matisse Capital.
Education Savings Account
For some people, Education Savings Accounts (ESA) are a great way to supplement a 529 plan. If you plan on contributing more to education expenses and want to cover expenses from kindergarten through college, an ESA might help you save, and withdrawals are tax-free if used for eligible expenses.
Education Savings Account Advantages
- Account earnings can grow tax-deferred.
- When withdrawals are used for qualified expenses, they are tax-free.
- Contributions can be made to an ESA and a 529 plan for the same beneficiary in the same year.
Education Savings Account Application Checklist
It's helpful to have the following information on hand before you begin:
- Your Social Security number
- Your driver's license number
- Your employer's name and address (if applicable)
- Statement information for funds you may want to transfer
Common Questions
The information presented in Common Questions is for the purpose of general education and does not address the investment nor legal considerations of any individual. The opinions are of Matisse Capital.
Custodial Accounts
A Custodial Account is a brokerage account that allows you to make a financial gift to your child or another minor in the form of investments. The account is managed by an adult and is turned over to the child when they reach the age of majority (this varies state-to-state).
Custodial Account Financial Advantages
- No contribution limits
- No gift tax incurred for contributions up to $17,000 ($34,000 per couple) for each beneficiary in a single year
- For children younger than 19 who are considered dependents at the end of a year (or full-time college students younger than 24), the first $2,500 of the child's unearned income is tax-free (with amounts over $2,500 being taxed at the parent's tax rate).
Custodial Account Non-Financial Advantages
- Teaching your child about different forms of investments and assets
- Showing in real-time how saving and investing can be beneficial for their financial health
Important Considerations for Custodial Accounts
- All assets are held in the child's name
- 20% of the assets in this account will be considered when applying for higher education financial aid
- A Custodial Account is an irrevocable gift and must be turned over to the child when he or she reaches the age of majority
- Funds used prior to the age of majority must be proven to be used for the sole benefit of the minor
Custodial Account Application Checklist
It's helpful to have the following information on hand before you begin:
- Your Social Security number
- Your driver's license number
- Your employer’s name and address (if applicable)
- The contact information, birth date, and Social Security number of the minor
- Statement information for funds you may want to transfer
Common Questions
The information presented in Common Questions is for the purpose of general education and does not address the investment nor legal considerations of any individual. The opinions are of Matisse Capital.