Traditional or Roth IRAs may be withdrawn for education purposes penalty-free before age 59. The utilization of these vehicles for education funding is beyond the scope of this article. However, it must be used for the benefit of the child. Crummey Trusts are an alternative to custodial accounts. Legal and accounting costs associated with creating and administering the trust.
Income is taxed at trust rates.
Trustee maintains control, income distributions are discretionary. If the child chooses not to go to college, income and or principal can be retained or distributed according to the terms of the trust. They provide significant income and estate tax savings while the account owner retains control. Plans currently exist in 41 states and more states are developing them. Prepaid Tuition Plans are contracts whereby individuals purchase future tuition at todayy prices.