How Parents Reduce The College Tuition & Income Gap Using Kiss Trust

Posted by Tyler Phelps, Vice President of Eastern Point Trust Company on Jun 14, 2016

school2.jpgTuition costs have risen at a yearly rate that is far greater than the growth of the median household income, and they show no signs of slowing down anytime soon. This is not good news for parents, and even worse news for their students. Families must find a way to plan for their high school graduate’s tuition expenses before it is too late. While that sounds like a dooming cliché, it’s true. More high school graduates are attending college than ever before, making it difficult for students to receive sufficient financial aid. Financial aid is awarded based heavily on student need. Without proper planning, parents can hurt their student’s chance of receiving grants, scholarship, and even student loans, which can be detrimental to their child’s college plans. If this seems exaggerated, just take a look at the statistics and visualizations below:




Between the years of 2004 and 2013 (a 10-year period), tuition costs increased by $809 per year, on average. Between the years of 2004 and 2013 (a 10-year period), the median annual income increased by $1027.89 per year, on average. Seeing that the average median annual income (over the same time period) is $32,712.30 greater than the average yearly tuition cost, the difference in the average increase in the average median annual income and the annual tuition cost (which is only $218.89), seems insignificant. That’s because it is.  In fact, over the 10-year period between 2003-2014, the average annual percentage change of tuition (5.08%) is 236% higher than the average annual percentage change of median income (2.15%)Tweet: The average annual percentage change of tuition is 236% higher than the average annual percentage change of media income #KissTrust. If all of these numbers confuse you, you’re probably not alone. There’s just one thing you should take away from this. It is becoming more imperative to plan for your student’s college career. 


How to Reduce This Gap

If you are like most, you have no clue where to start. Planning for your child’s expenses seems daunting and insurmountable. The good news? Just by being here, you are already taking a step in the right direction, and college planning may be easier than you might think. There are several education accounts that parents can utilize, but they are not all same. Each type of account comes with a unique set advantages and disadvantages. While each account is different, and whether or not you have started saving for college expenses or just looking for a better alternative to college savings accounts, there is an option for you. Click here to view several types of college savings tools available to parents. 

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Tags: Irrevocable Trust, College Savings, Education Trust

The Better Alternative to Coverdell ESA That You Didn’t Know Existed

Posted by Aimee O'Grady, Child Savings Specialist on Apr 27, 2016


Explaining the Coverdell ESA

Formerly referred to as the Education IRA, the name was changed to the Coverdell Education Savings Account in 2002. A Coverdell ESA permits custodians to save money for qualified education expenses for a named beneficiary who is under the age of 18 when the account is established. In addition, the savings can be used for both higher education and certain K-12 expenses. The Coverdell ESA is a tax-free investment option that offers tax-free withdrawals when the funds are used for qualified expenses. It’s attractive for families with fewer dollars to invest, who meet the eligibility requirements and aim to use the funds for both elementary and secondary as well as higher education expenses.  

Coverdell Advantages

1)     No Relationship Required. A Coverdell ESA does not require that there be a relationship between the custodian and the beneficiary. Friends, family and even companies or other entities may establish an account and make contributions.

2)     Child Contributor. For families who earn more than the maximum income permitted, the beneficiary may make contributions to the account themselves with money gifted to them if they earn less than the maximum income allowed.

3)     Qualified Expenses. With the option to use the funds for qualified elementary and secondary school expenses, the Coverdell ESA offers expanded savings options when compared to other plans.

Coverdell Disadvantages

1)     Low Maximum Limit. With a $2,000 maximum contribution limit, the Coverdell ESA has a much lower limit than other savings plans per child.

2)     Eligibility Requirements. Families must have a modified annual adjusted gross income of under $220,000 annually, or $110,000 for a single parent. Contributions made by individuals whose income exceeds this level will be subject to penalties.

3)     Withdrawal Age. Funds must be fully withdrawn by the time the custodian turns 30, unless the individual has special needs. Certain transfers to family members are permitted.

4)     Not tax-deductible. Finally, contributions to a Coverdell ESA are not tax-deductible.

The Better Alternative You Didn’t Know Existed

The Coverdell ESA has aspects that are appealing to parents, but it comes with its own set of limitations and drawbacks. The alternative to Coverdell ESA pertinent to college and education savings is a trust. Kiss Trust is the only provider of small trusts, family trusts and education savings trusts for parents saving for their child’s education and college expenses. With a trust, there are no annual contribution limits, and like Coverdell ESAs, anyone can contribute to it. With HESM provisions included, Kiss Trust lets parents create and fund trusts that can be used for education expenses. There is no limitation on annual salary either, so these trusts are available for anyone with a need to save and protect money for a child’s education. Unlike a Coverdell ESA, you can set distribution options to extend beyond the cutoff age of 30 years old, while preserving its principal. With one trust, family members can save for a child’s education, first home, retirement, and beyond with assurance that the funds will be used for the specified reasons.

Thus, a Coverdell ESA is an attractive savings plan for many families with the inclusion of qualified elementary and secondary education expenses, but it does come with its own set of limitations. When researching savings plans for college tuition, compare advantages and disadvantages with every plan before making a final decision that you may end up regretting.

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Tags: College Savings, Education Trust

Parents Are Rolling UTMA & 529 Plans into a Trust Due to These Tax Credits

Posted by Tyler Phelps, Vice President of Eastern Point Trust Company on Mar 25, 2016


The Shortcomings of Traditional College Saving Plans

Before trusts became a cost-effective tool for parents to save their child’s future education costs, accounts such as UTMA/UGMA and 529 plans were heavily used. 529 plans are the result of federal legislation that allowed parents to set money aside for college. However, time has shown that the high fund cost, limited investment selection, extra fees imposed by the states and restrictions of investment changes materially undermine the performance of 529 accounts. Fortunately, there is a simple, affordable, and prudent solution to their dilemma – college savings trusts.

Using Trusts to Save For College Expenses

Trusts are great tools for parents or grandparents with a desire to jumpstart their loved one’s future by saving for college expenses and beyond. Trusts can:

  • Protect assets from creditors
  • Limit the use of money for specific purposes beyond education (while the grantor is living or deceased)
  • Be named as the beneficiary of life insurance policies, 401k plans, IRAs, brokerage accounts, bank accounts, and more
  • With a properly drafted trust reserve the student’s eligibility for student aid and maximize their FAFSA awards, grants, and scholarships
  • Earn up to $600 in LTCGs, tax exempt, as of 2016

The student reaps the benefits of the college savings trust without any of the negative financial aid implications that UTMA, UGMA, and 529 plans carry. It gets even better! The trust can also safeguard the student’s eligibility for both of the federal educational tax credits, when properly drafted (like a Kiss Trust).

Parents can benefit from these educational tax credits

 The American Opportunity Tax Credit:

  • Can be utilized throughout a student’s first four years of college while pursuing an undergraduate four-year degree
  • Is worth up to $2,500 toward tuition, course-related books, supplies, and equipment
  • Can be refundable up to 40%, or $1,000, even when the student owes no taxes for the given year

Learn more about the American Opportunity Tax Credit.

The Lifetime Learning Tax Credit:

  • Can be claimed for an unlimited number of years while the student is pursuing a postsecondary degree
  • Is worth up to $2,000 toward tuition, course-related books, supplies, and equipment
  • Can’t be used with the American Opportunity Tax Credit (which is usually a higher value)

Learn more about the Lifetime Learning Tax Credit.

Problems for Parents with UTMA Accounts

Get Started

Take advantage of these tax credits while benefiting from the control provided for by a College Savings Trust. With a Kiss Trust, you can create an educational trust for your child, grandchild, or family and friends for a one-time fee of $49. TrustWare™, brought to you by Kiss Trust, hands anyone the power to build unique trusts without the help of an attorney, saving you time and money. Get started today, or chat with our support team to learn more!

Start a Kiss Trust today for just $20 (which is regularly $49) click here for more information.

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Tags: College Savings, UTMA

What Happens To an UTMA Account When a Child Plans To Skip College

Posted by Aimee O'Grady, Child Savings Specialist on Mar 11, 2016


Not all beneficiaries will attend college, but they will still have access to the funds in their UGMA/UTMA account.   

Key Takeaways
  • Beneficiaries have unrestricted access to the funds in UGMA/UTMA Accounts.            
  • Custodians can withdraw funds if they are used to benefit the beneficiary, including converting into an irrevocable education trust for the sole use of the beneficiary.
  • Withdrawal of funds by the parent or custodian after the minor is of legal age is not allowed.

A Parent’s Worst Nightmare

An UGMA/UTMA account is an easy savings tool for parents to open for their children. The beneficiaries own the assets the moment the account is created and can access the money as soon as they are of legal age, often 18 or 21. Most UTMA and UGMAs, or custodial accounts, are opened as a way to save for higher education anticipating that the beneficiary will attend college. But what happens if they choose not to?


It's Their Assets… It's Their Choice

Simply put, the beneficiary of an UGMA and UTMA account can use the funds at their discretion, making them quite unpractical as a college-savings plan. These are custodial accounts for minors, which means the custodian manages the money until the minor attains the age of majority. Once they reach the age of majority, beneficiaries have unrestricted access to the assets in the accounts to do whatever they want. They can register for higher education courses, buy a car or go on vacation, since there are no restrictions on how the money can be used.

One of the benefits of these custodial accounts, however, is that they can be converted into irrevocable trusts. Prior to the age of 18, assets in UGMA/UTMA accounts may be withdrawn by the custodian and used for circumstances that benefit the beneficiary. Therefore, it is allowable for the funds to be converted into an irrevocable education savings trust.


UTMA Conversions Are Allowable, Easy, and Affordable

Prior to the UTMA or UGMA beneficiary reaching the age of majority, the custodian of the account (usually the parent or grandparent) has the ability to transfer the custodian account assets into an irrevocable savings trust for the sole use of the beneficiary.  This is often done by parents when they suspect assets put aside for education-related expenses could be frittered away by young beneficiaries who currently have no intention to currently attend school or have money management problems.

The advantage of converting UGMA and UTMA accounts into an education savings trust are:

  1. Defer access to assets until future date(s) or event(s) if beneficiary does not attend school
  2. Education Distributions can be made directly to the University
  3. GPA performance incentives are available
  4. Graduation incentives available
  5. Prevent use of funds for unrelated activities
  6. Preserve or maximize FAFSA considerations
  7. Ability to issue distributions as loans
  8. Minimum GPA requirement can be elected
Best of Intentions

Custodians be cautioned:  It is not allowable for custodians to withdraw assets from a UGMA/UTMA account for purposes other than those benefiting the beneficiary. Liability issues could result, regardless of how the custodian feels about the beneficiary’s decision to not attend college.

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Tags: College Savings, UTMA

Saving For College: 529 Plans, UTMAs, and College Savings Trusts

Posted by Ned Armand, President of Eastern Point Trust Company on Dec 22, 2015

College expenses savings trust fund

As tuition costs rise parents are searching for a multipurpose savings account, which goes beyond 529 plans and UTMAs, such as a college savings trust. 

Key Takeaways

  • Now is the time to start saving for future college expenses.
  • Consider an irrevocable trust to maintain control of assets.
  • Gain peace of mind with a college savings trust.

The Rising Cost of Tuition

When considering the rising cost of tuition, it is helpful to look at historical tuition trends. The New York Times recently published an article that helps put things into perspective. In 1974, the article cited the average income was $13,000 annually, a new home was $36,000, and a car was $4,400. A four-year private education cost $2,000/year whereas a public education was only $510/year. When converted into the value of today's dollar, those figures equal $62,000 for income, $174,000 for a house and $21,300 for a car. Tuition, in today's dollars, was $10,300/year for a private education and $2,500 for a public one.

In the past 40 years, some things have changed only slightly (income is now estimated at $64,000), some have remained steady (vehicles) while other items have changed rather significantly. The cost of housing has increased by over 60% in 40 years. The real sticker shock, however, is in the rising cost of tuition over the past four decades.

Today, a private education, estimated at $31,000/year, is three times what it was in 1974 whereas a public education has risen almost four times to $9,000 each year. Without income rising at the same pace, tuition has become a stretch for many families encouraging them to plan well ahead of time, when children are still babies. Fortunately, all-in-one plans exist today that can help families pay for college tomorrow.

Savings Plan Options

There are some options available for families to save for college expenses:

529 Plan. A 529 plan grows tax-free over its lifetime. A major disadvantage is that the funds can only be used for education and a penalty (around 10%) exists if funds are withdrawn for other purposes. They can affect students eligibility for certain financial aid, and the inflexibilty can pose a challenge if the child chooses not to attend college. 

UTMA Account. Families can also open a Uniform Transfer to Minor Act (UTMA) account. A UTMA is an easy-to-open account in the name of the minor with an adult acting as a custodian for the account. One disadvantage is upon the age of maturity (18 or 21) the child is legally entitled to the funds and can legally use them on anything they choose, regardless of the wishes of their parents.

Irrevocable Trust. A third option is an irrevocable trust. An irrevocable trust provides the most customized distribution options and permits the grantor to select at what age and for what events the beneficiary can access the funds. While many plans require the assistance of an attorney, all-in-one savings plans do exist that eliminate attorney expenses and have only minimal expenses to manage. 


Plan Ahead with the Right Trust

The best time to plan is when children are young, and plans have years to mature before use. Thankfully, with several available options, families can plan ahead for tuition and have peace of mind. An irrevocable trust provides families with the greatest flexibility to help prepare for unexpected plans. With an irrevocable trust, children can have access to savings at an age predetermined by the grantor, with subsequent distribution elections determined if college is not in the cards for them.

Do you have a future college student in your family? Download our free financial aid checklist to help prepare them for their education.

Download a Free FAFSA Checklist


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Tags: College Savings

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