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3 Ways Grandparents can help with College Costs

It’s not unusual for grandparents to want to help pay the college costs of their grandchildren. Like everything else financial, a little thought as to how they help can make a difference.  Here are 3 things to consider.

1.   Outright Cash Gifts

One way for grandparents to help grandchildren with college costs is to make an outright gift of cash or securities.  But there are drawbacks to this approach. A gift greater than the annual federal gift tax exclusion ($14,000 from an individual/$28,000 from a couple) might have gift tax consequences.  Another drawback is that a cash gift to a student will be considered untaxed income by the federal aid application (FAFSA), which can impact financial aid eligibility.

       Pay Tuition Directly to College

 Tuition payments made directly to a college aren’t considered taxable gifts, no matter how large the payment.  So grandparents don’t have to worry about the $14,000 annual federal gift tax exclusion.  But payments can only be made for tuition. Room and board, books, fees and other similar expenses don’t qualify.  Another concern is that colleges will often reduce a student’s institutional financial aid by the amount of the grandparent’s payment.  So check with the college to see how your payment will affect the student’s financial aid before using this technique.

 3.   529 Plans

A 529 plan is a great way for grandparents to contribute to a grandchild’s college expenses. The money inside the 529 plan grows tax deferred. And, as long as withdrawals are used for education expenses of the beneficiary, no tax is paid on them.  Under special rules unique to 529 plans, individuals can make a single one year contribution equivalent to 5 years of gift tax exclusion ($70,000 or $140,000 for a couple).  One thing to keep in mind is that if the money in a 529 plan is used for anything other than education the earnings become taxable an subject to IRS penalty.

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February 17, 2015 - What Pushed the Major Indexes Up?

Stocks ended another positive week at record highs, sending the Dow above 18,000 and the S&P 500 to a new record close. Investors reacted positively to firming oil prices and news of a possible peace deal in Ukraine. For the week, the S&P 500 gained 2.02%, the Dow rose 1.09%, and the Nasdaq grew 3.15%.[1]

here were a few factors behind the week's rally, which erased previous losses and brought the major indexes back to positive for the year. Oil prices, which have been falling steadily for months, may be bottoming out as production declines and the number of oil rigs fall. Markets have been sensitive to oil prices and a slight bounce last week was enough to send stocks higher.[2]

The deteriorating financial situation in Greece was also in focus. As Greece nears its deadline for a new round of loans from the EU, encouraging remarks from Greek leaders suggest that an 11th-hour deal may be possible. Greece is seeking a new debt agreement with EU lenders that would allow it to back out of the painful austerity measures that have been imposed by creditors since 2010. If no agreement is reached, Greece would probably seek loans from alternative sources (like Russia or China), potentially damaging internal financial relations within the EU.[3]

Investors also reacted positively to better-than-expected growth numbers from Europe, which showed that the Eurozone economy grew 0.3% in the fourth quarter of 2014. Germany's economy outperformed, growing 0.7% on strong domestic demand. Even better, only three countries in the 18-member zone experienced economic contractions: Greece, Finland, and Cyprus.[4]

Oil will likely be the source of more market activity during this holiday-shortened week as analysts try and determine whether crude oil prices may be stabilizing. The effects of a Russia-Ukraine ceasefire may also ripple through oil markets, causing additional volatility, though we can hope for further market growth.



Monday: U.S. Markets Closed For Presidents' Day Holiday Tuesday: Empire State Mfg. Survey, Housing Market Index, Treasury International Capital Wednesday: Housing Starts, PPI-FD, Industrial Production, FOMC Minutes Thursday: Jobless Claims, PMI Manufacturing Index Flash, Philadelphia Fed Survey, EIA Petroleum Status Report

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.



Consumer spending lags in January. Retail sales, a core measure of how Americans spend, edged up barely 0.1% after dropping 0.3% in December. This report suggests that Americans are not using fuel savings to boost their spending, which could trim Q1 economic growth.[5]

Small business sentiment downbeat. Optimism about the economy fell last month among small business owners who worried about sales and decreasing inventory spending. However, sentiment about the labor market remains positive.[6]

Weekly unemployment claims rise unexpectedly. The number of Americans filing new unemployment claims rose slightly last week. Seasonal issues - including major snowstorms in Massachusetts - may have affected data collection and underlying labor trends still show strength.[7]

U.S. business inventories increase slightly. Inventories, a key factor of economic growth, edged up just 0.1% in December, supporting views that growth slowed in the fourth quarter.[8]

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.

The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Google Finance is the source for any reference to the performance of an index between two specific periods.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

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