Tax-Free Education Dollars?
How to Legally Bypass the Tax Man on Earnings for ALL Education Expenses with IRS Permission!
Have you ever stopped to wonder how much money you’d have to earn over your lifetime to send ALL your children from Kindergarten all the way through Grad School?
Then there’s the grandchildren. What about helping out with their education?
Chances are, as you were pondering, you forgot to take into account Uncle Sam. Now add 40% more to whatever number you came up with to include that tax haircut on your earnings.
Just the thought of it all makes me sick!
A Special Gift from Congress
Whatever your number is, can you imagine being able to legally avoid taxes completely on your earnings for education expenses?
If you embrace the gift that Congress gave us over 10 years ago… you won’t have to pay state or federal income taxes on the income first… allowing your education investment to grow tax-free.
Too good to be true?
Say hello to the Coverdell Education Savings Account!
10 Compelling Reasons to Get Started With Coverdell Education Savings Accounts Today
This valuable and specialized information is available to every parent or grandparent who cares about their family’s education . . . both now and in the future. Establishing a CESA allows you to make Non-Traditional investments, such as buying a rental house or lending money, and then paying for tuition, uniforms, dorm rooms and computers from the earnings of the investment without first having to pay State or Federal income tax.
Let’s just call it a 40% raise. The same 40% in State and Federal taxes you won’t have to pay. My name is Walter Wofford and I used a CESA to help pay for my daughter’s expensive college tuition bill. You can do the same with all education related expenses from K1 until they graduate, quit or turn 30.
Here we go . . .
1. Your Kids Will Put Your Picture Frame on the Mantel.
Establishing a Coverdell Education Account (CESA) for a family member is probably the most important action you can take to enhance the student’s life and their future family’s life. “Yes, Grandpa helped me go to college and I will never forget it”, said Sara. For the parent, the most stressful time while raising children is writing the checks for their education. So your action of establishing and directing a CESA will not just help the students but their parents as well.
2. Education Expenses are only going to Increase.
Tuition has increased sharply NATIONWIDE from 2008 to 2013. Over 20%! Who knows what percentage increase the next 5 years will bring? Plus EVERY State has dramatically decreased the amount they are subsidizing the College Education System. States have cut back 20% decrease in the last 5 years. Parents and Students are getting squeezed . . . and will continue to be squeezed.
3. Tax Rates are ONLY going to Increase.
As a result of overleveraging our county, Congress has no choice but to raise taxes. No one argues with that fact. With a CESA, you don’t have to pay any State or Federal tax on the earnings if spent for Qualified Education Expenses. This separate Tax Free account is not impacted by Congress’s inability to balance the runaway budget.
4. You can use Your Skill and Your Knowledge to Direct the CESA’s Non-Traditional Investments.
Since this account can be truly self-directed into investments You understand, you don’t have to delegate the decisions to someone who has neither Your skill nor knowledge.
Here are some examples of CESA investments that you might understand (or know someone who does) to enhance returns:
- Buying Rental Houses
- Buying Moetgages or Notes
- Options on Real Estate
- Other valuable assets
- Wholesaling houses
- Buying income steams at a discount
- Buying medical collections for pennies on the dollar
- Joint venturing
Start up companies and much much more!
5. This Multi-Generational Education Trust Can Last up to 99 years… Way Past Your Lifetime. Now that’s Leaving a Legacy!
Since Congress made the contribution rules permanent in January 2013, this trust fund can literally last for generations. If the money is not spent by the time the student turns 30, it can be passed along Tax-free to almost any other family member under the age of 30. You can design CESAs around the spacing of the student’s ages.
6. Your College Kids Actually Leave Home.
This may sound a little harsh, but parents need a break after 18 years of care giving and the students need a break from their parents. Independence is part of growing up.
By establishing a CESA, there may be enough money to pay for dorms in a far away University. It has been reported that 57% of college students live at home today (source: The Wall Street Journal, July ‘13). I suspect a big reason is that they can’t afford to leave home and pay for tuition.
7. You Can Combine CESA Investments with other Tax-Free & Tax-Deferred Accounts.
Many people have Traditional and Roth IRAs. Some have SIMPLE and SEP IRAs. Some even have 401(k)s and Health Savings Accounts (HSAs). You can combine any and all of these accounts with a CESA (or multiple CESAs) to make investments in entities like business startups (Apple) and even buying shares in a newly formed bank. You will have some real investment clout by combining accounts.
8. The CESA Is Not You and Never Will Be!
Properly established CESA accounts separate the student’s assets from the person who established the account. This is particularly important in tax preparations, asset protection and for qualifying for student loans. We need to talk more on this topic. Very important!
9. You can establish a CESA for All Your Children or Grandchildren and Join Them All for ONE BIG INVESTMENT & Even Leverage the Investment with Debt. There are no limits on how much profit a Coverdell ESA can make.
By forming a managing entity, each CESA can join other CESA for bigger dollar amount investments, such as building a spec house in an up and coming neighborhood. Or, buying raw land and then subdividing into smaller parcels and then sell with financing. Amazing!
10. If You Don’t Do It… Somebody will Definitely Feel the Pain of Regret.
Since this is a tax-free account, you will pay unnecessary taxes on the income…if you don’t do it.
Some family member won’t get the best education (or any education)…if you don’t do it.
You next family member might enter your family circle from the oil change department of Jiffy Lube…if you don’t do it.
College widens circles of influence but only if the student is there. If a grand parent creates the CESA, their children (the students parents) will feel the squeeze . . . IF YOU DON’T DO IT!
I will leave you with this…
“Deliberation is the work of many men. Action of one alone.” – Charles DeGaulle.
What’s the Next Step For You?
Are You Ready to Bypass the Tax Man on ALL Education Earnings With the IRS’ Permission?
I’d love to have an intelligent conversation about your establishing and growing a Coverdell Education Savings Account for your loved ones.
Walter R. Wofford
PS.: Call my partner, Dave Franecki today at Metropolitan Financial Services, LLC 888-861-4292 for additional details.
Source: This publication was written by Walter Wofford and published here with permission. All rights are reserved by Tax Free Education Dollars under State and Federal Copyright Law. No part of this publication may be reprinted, reproduced, paraphrased or quoted in whole or in part by an means.
Disclaimer: This publication is intended to provide accurate and authoritative information with regard to the subject matter covered. It is offered with the understanding that neither the publisher nor the author is engaged in rendering legal, tax, or other professional services. If legal, tax, or other expert assistance is required; the services of a competent professional should be sought.
From the Declaration of Principles Jointly adopted by a committee of the American Bar Association and a committee of Publishers and Associations.
This information is intended for instructional purposes only. Every effort has been made to reflect the applicable laws as of the date of the publication of this book. However, this is a dynamic field of endeavor in which new laws are enacted, old laws revised, and/or reinterpreted on a continuing basis and where statutes, rulings and case law are constantly changing. Readers are advised to proceed with the techniques descried herein with caution. The Author, speakers, printers, licensees nor distributors makes no warranties, express or implied about the merchantability or fitness for any particular use of this product.