Inheritance and College Savings

[LiseE]

I recently received an inheritance which I would like to invest for my two sons college education.  We have a 529 set up ... should I just do a lump sump into those accounts or invest elsewhere on their behalf?

- Lise

[radram]

It might depend on the amount, and the tax benefits of your state.

Are you willing to share more details?

[LiseE]

We will have about 75K to contribute to each 529.  Seems the state of CT has max lump contribution per couple of 10K so we would be doing this over time I guess?

[AlmstRtrd]

It's worth talking to a college financial planner about this. Also read Paying For College Without Going Broke (it's updated yearly). You may want to put the money aside for your kids but not make it immediately visible for the FAFSA or CSS forms. Schools will grab 529 money in a heartbeat. In other words, having money stashed there, while it feels like you are doing the right thing for your children, might not be the best tactical move because it may lessen the amount of financial aid they receive. Just my two cents.

[radram]

Depending on the age of your children, that might be too much saved dedicated to education. A 10 year old could have around $150,000 for college if you start at $75,000. That is about double a state education.

Still, if that is where you want the money to go, CT also allows a 5 year carry forward, meaning you can put the next 5 years of contributions in there now and get the next 5 years of deductions later. That would eat $120,000 now (10k each child for this year plus the 5 carry forward years).

Almostrtrd has a good point regarding 529's FAFSA. IRA accounts are not considered for FAFSA. Are you maxing out all of your 401k/IRA/ROTH accounts for you and your spouse?