Coverdell Education Savings Accounts

I have written a couple of times about 529 college savings plans. Another alternative is the Coverdell Education Savings Account or ESA. While there are unique advantages to 529 saving plans the Coverdell ESA is a college savings vehicle you should know about.

Coverdell ESA's allow contributions of up to $2,000 per year that while not tax deductible, do grow tax free, and earnings remain tax free for qualified education expenses that include secondary schools (private, religious, etc.). The range of investments is generally larger than that offered by 529 plans which are run by mutual fund companies. Any IRA custodian can also offer Coverdell ESA's and companies like Shwab and Vanguard offer these accounts. With a self directed account you can choose from stocks and bonds in addition to mutual funds, so your portfolio can be managed with greater flexibility.

To make contributions a couple's adjusted gross income must not exceed $220,000, or $110,000 if you are single. To qualify for tax free withdrawals the money must be spent for qualified education expenses before the beneficiary turn 30 years old, however you can change the beneficiary to another family member once per year. The beneficiary must be under age 18 unless the beneficiary is a special needs child. Contributions from all donors cannot exceed the $2,000 per year cap.

With the rising cost of educating our children outstripping the general rate of inflation saving for college becomes more and more imperative. Coverdell ESA's are another account you should consider.

Beloit College Mind Set List

One of my favorite reads each year is the Beloit College Mind Set List. This list compiled by Tom McBride professor of Humanities and offers a peek into the mindset of each new freshman class. The perspective of todays eighteen year olds (born in 1989) juxtaposed over the perspective of someone much older is sometimes funny, sometimes poignant. The entire list contains 70 items and can be viewed here. My favorites include:

• They have never "rolled down" a car window
• Rap music has always been mainstream
• Russia has always had a multi part political system
• Al Gore has always been running for President, or thinking about it
• MTV has never featured music videos

Selecting A Corporate Trustee

A comment on my recent post "Five Questions To Consider When Naming a Trustee" writes, "Your comment about a corporate trustee is interesting, as I am leaning significantly that direction because of a lack of qualified individuals within my personal relations to manage my trust. How would you recommend finding a suitable corporate trustee ?"

Corporate trust services are offered by trust companies, banks, some attorneys, and some financial advisors.

Your first step should be to determine just what services you expect to receive from the trustee. You can choose a trustee to perform the administrative functions only. This could include:

• Administration of the trust in accordance with the trust agreement.
• Accounting and reporting of income, expenses, and capital gains and losses.
• Distribution of income and/or principal to beneficiaries as determined by the trust.
• Annual administrative account reviews
• Issuance of broad fiduciary guidelines
• Filing of annual trust income tax returns.
• Providing custodial services and executing transactions.

Using only administrative trust services the beneficiaries or a trusted financial advisor could be entrusted with managing the assets of the trust.

You can also hire a trustee to provide both the administrative and asset management functions.

When you have determined exactly what services you want the trustee to provide you can move to the next phase which is where you should request proposals from several sources. If possible you should meet face to face with a trust officer from each firm you interview. While very intangible the personal touch is a large part of the function of corporate trustees.

Some of the questions you will want to ask include:

• What account minimums does the trustee require?
• How long have they been in the trust business?
• How many trusts do they manage and what is the average size of their trust accounts?
• What level of experience does the staff have and how did they acquire that experience?
• What is the staff turnover?
  
• Do they have an open architecture or are they limited to proprietary in house investment options?
• What conflict of interest might the have?
  

Of course you will also want to compare investment performance and fees along with the services provided. Location is also a consideration. Will they be accessible to your heirs? And finally, be sure they are really in the trust business, not just going through the motions so they can advertise that they offer trust services.

Stopping Credit Card Offers

If you are like me you mailbox must contain at least five pounds of mail from credit card offers every week. Gee, I don't know how they know I'm so broke! They come to me, to my wife, to my college age kids. Everyone it seems but the family dog.

If you want to stop the harassment (or stop the temptation) and save a few thousand trees you can call 888-567-8688 or visit www.optoutprescreen.com. The Direct Marketing Association created these avenues to allow consumers to request removal from marketing lists that use information provided by credit reporting agencies.

You student may still be tempted by easy credit offers. My 19 year old told me he filled out an application at school because he got a free meal at some fast food outlet, but at least its a start. It is also a chance to have a conversation with you young adult about the pitfalls and dangers of credit card usage.