Posted on August 02, 2006 at 17:32:31:
Saving for college often starts as soon as the child is born. Today, 529 college-savings plans offer a tax-advantaged opportunity to save, as do Coverdell accounts. A Hope credit can lower the tax bill by up to $1,500 per student.
It’s generally not advisable to put college savings in a child’s name – first because control passes to the child at legal majority, college or no, second because funds in the student’s name count against the chance of financial aid. Money in a 529 plan, however, is controlled by the donor, though not part of his or her estate. Grandparents can give as much as $12,000 free of gift taxes to each child ($24,000 jointly). Better yet, there is no limit to how much they can give if payment is made directly to the school.
One warning: when concentrating on college savings, don’t forget about retirement. Remember that grants, loans and scholarships are available for college, but there are few options for retirement.