Let’s talk about the vehicles available to you for saving for college. 

– There are lots of tax-favored investment strategies for college and supporting minors as they head off towards college.  The Coverdell Education Savings Account is very flexible and allows you to contribute $2000 per year per child, tax-free, though it is inferior to 529 plans in some ways.

– 529 Plans are administered state-by-state, and therefore have some different rules and guidelines.  Oddly enough, you can choose another state’s 529 plan for you if you want to, though you may sacrifice some home-state benefits.  Two parents can contribute up to $28,000/year into a 529 plan, which is calculated by the federal gift tax exemption of $14,000 per person per year, up to a grand total of $415,000.

– UGMA/UTMA (Universal Gift/Transfer to Minors Act) accounts can be used for transferring money to a minor, but don’t receive the same tax benefits as an ESA or 529 plan.  Furthermore, when the minor reaches 18/21, the money is theirs, and there is nothing much you can do about it, and they don’t have to use it for college.  This could be devastating for someone who is making destructive, immature choices.  Choose wisely!