Higher Education Savings and Planning: Tax and Nontax Considerations

5 Texas A&M L. Rev. 343 (2018)

48 Pages Posted: 10 May 2018  

Philip Manns

Liberty University - School of Law

Timothy M. Todd

Liberty University School of Law

Date Written: 2018

Abstract

Funding higher education is among the critical financial decisions made by individuals and families. There are myriad options. Yet, the conventional wisdom — namely using Section 529 Plans — may not be the optimal vehicle to effectuate this goal. Therefore, this Article discusses various strategies to plan, save, and pay for higher education. It compares various savings methods including gifts, UTMA accounts, Section 529 Plans, trusts, and other vehicles. The analysis explores both tax and non-tax considerations, including the effect of different strategies on financial aid, transaction costs, investor control, income taxes, gift and estate taxes, flexibility, and creditor protection.

This Article concludes that the ubiquitous Section 529 Plan may not be as effective as conventional wisdom suggests. Indeed, we argue that Section 529 Plans are optimal only when capital can be exclusively committed to education funding, which may not be the most desirable savings tactic for a wide swath of American families who need to plan for other financial needs (e.g., retirement and unforeseen medical needs).

Keywords: college, higher education, savings, financial planning, 529 plan, income tax, transfer taxes, creditor protection

JEL Classification: K10, K20, K30, K34, K36, K39

Suggested Citation

Manns, Philip and Todd, Timothy M., Higher Education Savings and Planning: Tax and Nontax Considerations (2018). 5 Texas A&M L. Rev. 343 (2018). Available at SSRN: https://ssrn.com/abstract=3173847

F. Philip Manns

Liberty University - School of Law ( email )

1971 University Boulevard
MSC Box 710129
Lynchburg, VA 24515
United States

Timothy M. Todd (Contact Author)

Liberty University School of Law ( email )

1971 University Boulevard
Lynchburg, VA 24515
United States

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