A Financial Plus for Parents With College-Bound Kids
BY Rose Greene
August 11 2011 4:00 AM ET
Back-to-school time has many college-bound kids in a state of excitement. Their parents might feel something more akin to panic. There’s good news for same-sex couples, though: The fact that the IRS doesn’t recognize same-sex partnerships might actually make it easier for your kids to come by financial aid. That’s because defining the student’s “household” — which is the main determinant that the Federal Student Financial Aid program uses to calculate your contribution—requires only one parent’s income. That means more financial aid.
And if little Lola isn’t ready to set off for Tulane this month? Start planning now, says lesbian financial adviser Rose Greene. “The sooner money goes to work,” says Greene, “the more money that working money can make.”
Start with a good online calculator like SavingForCollege.com, which can help you determine the costs associated with college, evaluate various 529 plans, and gauge the vast state-by-state differences. Finding a good 529 plan is still one of the best investments you can make, says Greene. The tax-advantaged savings plan, often called the 529 Prepaid Tuition Plan, is one of the best tools for saving for your child’s future college costs, and there’s no restriction on who contributes.
“Same-sex couples can contribute together — as can anyone and everyone,” she says, which means those grandparents can fork over some cash too. “The real benefits of a 529 plan is that any single person can bundle five years of ‘gifting,’ which is $13,000 a year, all up front to the plan.” That means someone could invest $65,000 all at once if they wanted to, which is good news for grandparents want to help fund their grandkids’ education and easily get $65,000 out of the taxable estate.
“With 529 plans there can only be one primary owner — either individual account or as part of a trust account — but,” Greene adds, “they do allow for a successor owner, so in the event something happens to one spouse, the other would be successor owner.”
Lest you’ve missed the gay divorce headlines, remember still to protect your investment, she says: “The smartest thing same-sex parents can do is to have a separate legal agreement that can act as a separate document laying out what they want the 529 account to do, and that they both consider it jointly owned.”