Compare KissTrust to 529s

Trading Pennies for Dollars
 

Deciding on how best to save for your child’s college education can be difficult as there are a dizzying array of options. Some college savings options offer tax deferred build up and, in most scenarios; the tax-deferred saving account is preferable.  However, that’s not always the case.

With a 529 plan for example; the account owner is exempt from paying taxes on the account’s earnings.  But, the assets held in the account count against the student’s eligibility for financial aid.  That’s right! Congress gives with one hand and takes away with another.  The nasty little secret is that the more you save in your loved ones 529 the less they are eligible for in scholarships, loans, grants and other financial aid.  Fortunately, there is another method to save for education expenses and it will NOT decrease eligibility for financial aid.

A KissTrust is an irrevocable trust, and as such the trust owns the assets.  Since the assets are not in the name of the parent or child it will not affect eligibility for financial aid. With a KissTrust paying taxes on your annual gross return can be beneficial for the total amount available for college expenses.

Let’s look at how:

With a onetime contribution at birth of $5,000 with an assumed annual rate of return at 3% in a KissTrust for a child, by the time he or she reaches the age of 18 the trust is worth approximately $8,295. With the same $5,000 one time contribution at birth in a 529 plan at age 18 it will be worth approximately $8,767 the difference of $472 including the $405 paid in taxes by the KissTrust on investment returns.

But wait you say, the 529 plan is worth $472 or 5.69% greater than the KissTrust. How can KissTrust be better?

Here’s how:

The $8,767 in the 529, will count against the student qualifying for financial aid. With a KissTrust $8,295 of assets will be available for college expenses AND the student will still be fully eligible for financial aid and grants. KissTrust assets will never count against financial aid as they are not considered student or parental assets.

Assuming a financial aid package of $8,000 along with your KissTrust, you will have approximately $16,295 for college expenses, but with a 529 plan there would only be $8,767 available for expenses.

I bet you would be willing to trade $472 to be eligible for $8,000 worth of state and federal grants and low interest financial aid. That’s over a 400% percent return on investment. Here are the numbers in detail.

With KissTrust, you have the opportunity to trade a few dollars of taxes for thousands of financial aid. That is trading pennies for dollars, which is always a good deal.