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From College
Coverdales to Trusts

The Facts on Planning for Your Child's Education

By Kendeyl Johansen

Grandparents have used trusts for years to transfer assets to grandchildren (up to $10,000 a year without gift tax) while maintaining the ability to control the funds after the child reaches the age of majority. A trustee distributes the funds according to the trust's goals.

But trusts are expensive to set up and maintain well. They are also taxed highly and don't benefit from the tax advantages of other college savings plans.

Just say "yes" to free money! The gratis online service Upromise contracts with thousands of companies (McDonalds, Toys "R" Us, AT&T) to rebate part of customer spending as college savings. Subscribers can also earn rebates on groceries, gas, cars and restaurant meals. The savings are held in a secure Upromise account and can be transferred to a 529.

Jill Miller of Bridgewater, N.J., mother of two, opened a Upromise account and she recommends the free savings plan to others. "I like the tax benefits of the 529 plans linked to Upromise, and I like receiving money back for gas, groceries and other things I buy," she says.

Saving money for college is never an easy task, but if you start early you'll greatly lessen the load when college time rolls around. Since the birth of her daughters, Lauren Elliott of Killeen, Texas, has saved a little money each week, even though it's difficult. She plans to buy CDs that will mature when her girls turn 18. "I feel it's important for my children to go to college without feeling as though there's not enough money to do it," she says. "If I save now, the money will be there and my daughters can follow their dreams."