Which type of a/c to open kids? any non-tax types?

[r2iGolkonda]

Hello,

I would like to put around $10 to $20k amount for kids education. 529 is not for me as we will be R2I'ing this year. Idea is to put this money and start managing myself and invest in MF. Currently I have Vanguard but that is taxable account. Even after R2I, I would like to keep this a/c for like 10 to 15yrs and should be able to use this money either for Indian education fee or in U.S.

I am curious if they are any type of a/c which can be tax exempt for some years on minor a/c's

I appreciate any feedback.

Thanks.

[moreqa]

Coverdell Education IRA is created just for this.
But the yearly limits are just $2000 per kid.
Check out the rules, etc., at

http://www.irs.gov/newsroom/article/0,,id=107636,00.html

[r2iGolkonda]

Moreqa,

Thanks a lot for quick response. I will look into it. I guess, $2k per year will be too small but maybe adding every year to it may work out better in long term to gain tax exempt.

[GMB]

"A Coverdell ESA is a trust or custodial account set up in the United States solely for the purpose of paying qualified education expenses for the designated beneficiary of the account. Qualified higher education expenses include expenses for tuition, fees, books, supplies, and equipment required for enrollment or attendance. If the designated beneficiary is enrolled at least half time at an eligible educational institution, certain room and board expenses are qualified education expenses. Expenses also include amounts contributed to a qualified tuition program for the same designated beneficiary. Qualified expenses include public, private and religious elementary and secondary school expenses. "


Question : Would India college education would be qualified for " eligible educational institution ?

[r2iGolkonda]

That's true. We don't know if indian educational institution are part of qualified expenses. Other thing is, not sure if colleges like engineering and medical are covered by this plan?

[moreqa]

In
http://www.irs.gov/publications/p970/ch07.html#d0e7234
it states:

"This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education."

and

" Certain educational institutions located outside the United States also participate in the U.S. Department of Education's Federal Student Aid (FSA) programs."

So I think that this account may not be useful for education in India. I am not sure.

[hawapani]

I have opened 2 savings accounts for my kids with Presidential Bank and I do contribute/gift every year 11k to each of the account. Now I am at a point where I cannot contribute more as Presidential allows only certain amount to earn good interest rate. But at least we can get some money tax free.

I am also looking for some more suggestions where we can open minor account to get tax free returns or better returns.

Thanks

[r2iGolkonda]

hawapani,

Can you please explain to me how you are getting tax free from those savings account? Can we gift some amount per year to our minor kids? Is that's what you are taking about as tax free?

If I remember correctly, my tax consultant said once if it is a minor a/c,we can get upto $1100 of gains as tax exempt. I am not sure if this is true.

Any other suggestions?

Thanks.

[hawapani]

Yes when I say tax free I mean u can have $750 tax free interest from minor account it is also called as custodian account. And after that it is only 10% up to certain amount.

[arora55]

Can we deposit money in minor savings account and the interest is tax-exempt? Please clarify
Thanks