Asian Journal- The Filipino-American Community Newspaper

AS parents, we understand the value of a college education. But what happens once our children are grown and have children of their own?

As a grandparent, you may want to help your grandchildren save for their education. Luckily, there are tax-advantaged vehicles available.

For instance, 529 plans allow you to set aside funds for a grandchild’s college education. As long as your grandchild uses the money in these accounts for qualified higher education expenses, there is no federal income tax on the withdrawals.1

Grandparents or other sponsors who have adjusted gross incomes below certain minimums can also contribute to a Coverdell Education Savings Account (ESA) to pay for a grandchild or beneficiary’s college education. You can contribute $2,000 a year to each beneficiary’s ESA. The funds can be used to pay for qualified higher education expenses or to pay qualified elementary or secondary school educational expenses. Withdrawals to pay such expenses are received free of federal income tax. 1

With the tax-advantaged savings vehicles available to grandparents, you shouldn’t feel limited in your opportunities to help your grandchildren get the education they deserve.

1Earning must be used to pay for qualified higher education expenses to be federally tax free. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s federal marginal tax rate and subject to a 10 percent tax penalty.

The information presented in this document does not constitute tax advice. Please consult your tax advisor for specific information about your tax situation, including any state tax consequences of the investment.

The State Farm College Savings Plan is available by registered representatives of State Farm VP Management Corp., One State Farm Plaza, Bloomington, IL 61710, 1-800-447-4930. Please read carefully the Enrollment Handbook and Participation Agreement and consider the investment objectives, risks, fees and expenses and other information associated with The State Farm College Savings Plan before investing or sending money. State and local tax laws vary. If you or the designated beneficiary are not Nebraska residents, you should consider before investing whether your or the designated beneficiary’s home state offers any state tax or other benefits to its residents for investing in the plan offered by that state.

The State Farm College Savings Plan (the "plan") is sponsored by the State of Nebraska and administered by the Nebraska State Treasurer. The plan is established in cooperation with State Farm VP Management Corp. ("State Farm"), the State of Nebraska, and OFI Private Investments Inc. (OFIPI), a subsidiary of OppenheimerFunds, Inc, pursuant to which State Farm offers classes of shares in a series of accounts within the Nebraska Educational Savings Plan Trust (the "Trust" and plan issuer) that are distributed by OppenheimerFunds Distributor, Inc. (OFDI and together with OFIPI, "Oppenheimer"). The Trust offers other accounts that are not affiliated with the plan.

The Nebraska State Treasurer serves as trustee of the plan; OFIPI serves as the investment manager, with the oversight of the Nebraska Investment Council; and servicing agent: OFDI serves as the distributor: Union Bank & Trust ("Union Bank") serves as the program manager.

State Farm does not provide investment management services for the plan and the accounts in the plan are not insured or guaranteed by State Farm, Oppenheimer, Union Bank and Trust Company, the Trust, the State of Nebraska, the Nebraska State Treasurer, the Nebraska Investment Council, any of their respective affiliates, directors, officers or agents or any other entity.

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