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Did You Know...
Family Law Software can calculate child support guideline amounts in 21 states.
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Question: How Can I Show Children's Assets (including 529 Plans) being used for College?
Answer: Suppose you have a pool of assets that you have designated as children's assets. They may be in a 529 Plan, or not.
You can enter them as either"Cash and Investment" assets, or as "IRA/401k" assets.
The advantage of entering it as an IRA/401k is that you can enter annual contributions, and the software will track the growth in value of the account.
If you enter the account as an IRA/401k account, be sure to check the box, located near the annual investment amount, to indicate that this is a non-deductible expense.
Once you create the account in the software, you have two options:
1. Include Children's Assets With Parent Assets.
This lets you enter the full value of the college tuitions and have the software draw down children's assets to meet the expense.
You may want to assure that these assets are liquidated first to meet the expense.
Here is how to do this:
You will notice a link labeled "click here to change the order of the investments," at the bottom of the Cash & Investments screen. (There is a similar link on the IRA/401k screen.)
You may click that link and sequence the assets in any sequence you wish. Specifically, you may move the children's assets to the top.
In this situation, you would *not* designate the asset as a "child's asset," so that the program *will* liquidate it to cover the college expenses.
Then you would enter the full cost of college as a major expense.
The software will liquidate the assets designated as children's assets first, before moving on to liquidating other assets.
This approach works best when the only liquidation is for paying college expenses.
One drawback of this approach is that you are then forced to allocate the children's assets between the parties.
If all assets are allocated 50/50, you can allocate the children's assets the same way and there will not be any distortion.
2. Segregate Children's Assets.
This second option is simpler.
You designate the children's assets as "children's assets." (You do that by clicking a check-box to that effect on the "more info" screen for each child's "Cash And Investment" or "IRA/401k" asset.)
When you enter the amount of the major expense, you enter only the net expense -- after the amount that will be covered by the children's assets.
To take a simple example, if tuition will be $100,000, and you think the children's assets will cover $20,000 of that, then you enter the major expense as being $80,000.
You then footnote the children's assets to say that they will be used for college, and you footnote the major expense to say that this is the amount remaining after children's assets have been used.
This approach is cleaner, but you have to calculate the net college cost requirement.