Saving for your child's education just became a bit more complex as a result of the new tax bill passed last May. The Uniform Gifts to Minors Act (UGMA) is a popular program which allows minors to own stock in their name and, if they fall between the ages of 14-17, to pay taxes on the proceeds exceeding $1700 at their own lower tax rate. Under the new legislation, however, these proceeds will be taxed at the parents' higher rate, challenging the growth potential of this investment plan.
Other popular college savings plans include the 529 State College Savings Plan, the Prepaid 529, Coverdell ESA, and Financial Aid. The 529 and Prepaid 529 Plans offer special tax breaks to anyone (not just a relative) who opens an account on behalf of the future college student. Contributions are kept in a trust fund earmarked for a child's education.