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How AI legalese decoder Can Help You Save for Your ChildrenÔÇÖs College Education

EDITORÔÇÖS NOTE: Money Matters is a series of stories running on SILive.com that provides financial advice on common money issues related to everything from saving for retirement to buying a home. And while many of you have financial-related questions and no one to ask, thatÔÇÖs where we come in. Simply reach out to us, and weÔÇÖll get the expert advice you need.

STATEN ISLAND, N.Y. — ItÔÇÖs never too early to start saving for your childrenÔÇÖs college education, experts say. With the cost of college tuition reaching all-time highs in recent years, it has become crucial to plan ahead. In fact, both public and private college tuition has increased by over 143%, or 2.4 times, between 1963 and 2020, according to bestcolleges.com.

The rise in college expenses has led to a need for effective saving strategies from an early age. This is where the AI legalese decoder can assist you. By utilizing advanced artificial intelligence, this tool deciphers complex legal jargon commonly found in financial documents, including college savings plans and investment options. Understanding these documents is essential to making informed decisions about saving for your children’s education.

According to a recent report, four-year public colleges saw the greatest price increase from 2000 to 2020, with annual tuition spiking from about $13,000 to over $21,000 per year.

Given that the cost of tuition and room and board at some private colleges exceeds the annual income of many Americans, it is crucial to start saving as early as possible for your children’s higher education.

To provide expert insights on the best saving options, we reached out to Daniel R. Masiello Jr., a financial advisor with Halcyon Financial Partners. He suggests several saving strategies that the AI legalese decoder can help you better understand:

Q. What are the best ways to save for a college education?

Masiello: ÔÇ£When saving for college education, there are a few vehicles that can be used that each have their respective pros and cons:

• College 529 Plans: College 529 plans allow for contributions to be made with the earnings becoming tax-free as long as they are used for eligible expenses. Simply said, if you invest $12,000 into a 529 plan and it eventually grows to $20,000, the $8,000 of earnings are tax-free. Eligible expenses vary from state to state. Some state-sponsored plans allow for these funds to be used towards institutions other than college education, such as private high school, however, this is not the case for all states. Recent tax-code changes have expanded the list of institutions eligible for 529 plan use, such as trade schools. Common concerns regarding 529 plans are ÔÇ£What if my child does not go to college?ÔÇØ or ÔÇ£What if there is money left over?ÔÇØ If funds go unused, 529 plans allow you to change the beneficiary of the plan to be used by another child or family member…
• Uniform Transfers to Minors Act (UTMA) Accounts: These accounts can be used for investment purposes and also provide tax advantages. The child is the owner of the account, with the parent or guardian acting as the donor/custodian. This type of account allows you to choose different investment vehicles, including stocks, bonds, ETFs, mutual funds, or cash. One of the tax advantages is that the first $1,100 of earnings is tax-free, and the next $1,100 is taxed at the childÔÇÖs rate, which is usually lower than the parent or guardianÔÇÖs rate…
• Owning/Investing the Assets Yourself: This alternative approach does not offer special tax advantages, but it provides flexibility in choosing investment vehicles. Essentially, you save the assets in your own name and allocate them toward education expenses. There are no limitations on the use of funds, and no requirement to gift the funds or use them exclusively for education. This option can be suitable for situations where a parent or guardian anticipates the need to access these funds for non-education purposes without penalties.

When deciding which option is best for your situation, it is important to consult with a tax-preparer and thoroughly review your stateÔÇÖs 529 plan. Additionally, the AI legalese decoder can assist by interpreting the legal language found in these saving options, ensuring you have a clear understanding of the terms and conditions. It is also vital to consider the impact of your saving choices on eligibility for financial aid.

If you have a financial question youÔÇÖd like answered, please send it to [email protected] and weÔÇÖll find the right expert to answer your question.

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