Tax-Efficient Learning - By Troy Onink , Lloyd Paradiso - 11/5/2009
After affluent clients have accomplished the goal of getting their children into the school or college of their choice, a key objective is to pay for the education as tax-efficiently as possible.
The good news for advisors, and their clients, is that there are a number of tools and strategies that allow even high-net-worth clients to achieve substantial savings on a four-year college education.
These strategies include income-shifting, the strategic use of tools such as the Hope Tax Credit and avoidance of the so-called "kiddie tax."
An in-depth analysis of these strategies will also show that advisors can, by making a college plan tax efficient, also enhance a client's retirement outlook.
Before delving into tax planning strategies, it should be pointed out that advisors can go a long way toward solving their clients' college planning issues by working with an admissions consultant.
In one example, Princeton Retirement Planning and Wealth Management in Princeton, N.J., has partnered with two leading independent educational consultants with the goal of "being able to deliver a client's best strategy to pay for the college that is the best fit for the student," says Kevin Graham, a principal of the firm.
The firm's clients have responded favorably. Graham says he can now have a whole new dialogue with clients, and it is around one of his clients' most important concerns: their child's private school and college education.
"Getting into the right private day school, boarding school or college isn't always easy these days, but it is always expensive," he says. "The counselor/advisor combination is able to address both issues seamlessly."
Experienced admissions consultants visit dozens of colleges each year and get to know admissions staffs and how the admissions process works at different colleges and universities. Their job is to get their clients' children optimal consideration at their schools of choice.
The top admissions consultants are highly responsive, do a lot of hand-holding, understand adolescents, are comfortable with family dynamics and know what works and what doesn't for a particular applicant at a particular institution. Wealth managers and admissions counselors work well together. There is little redundancy as each is an expert in his or her respective field and their combined wisdom allows families to proceed with confidence that they are giving their children every possible edge in an expensive, complicated and hyper-competitive arena.