If you have children of your own, you've no doubt wondered about the best way to teach them to manage money. Everybody's approach is a little different, but, as with all things in life, the sooner we start educating our children about money, the more likely they'll become financially responsible adults.
529 plans have traditionally been about the future. While using them in the present is now possible, it limits the plan's inherent tax benefits and you may be unwinding what you prepared for college. With college tuition rising on an annual basis, we cannot afford to let the use of a 529 plan in the present replace what it was initially designed to do.
Most taxpayers know that they can give gifts of up to $14,000/year to any individual without reporting the gift on a gift tax return. If married couples elect to split gifts, then the couple can give up to twice that amount ($28,000) to an individual without reporting. But, there is a little known loophole for making larger gifts without affecting the lifetime gift exclusion.
I can say that we have stayed away from using UTMA's and don’t really see it as the best available option for funding a child's education. We typically see this strategy with physicians 45 or older as it was the suggested preference of financial planners at one point, but I see the use of it declining and it is now almost non-existent with the younger physician generation. The reason is in the details: