529 Savings Plans 529 Savings Plans are state-sponsored investment programs designed to help families save for future college costs. Anyone, regardless of income, can open an account on behalf of any beneficiary and invest in stock and bond funds run by professional money managers. You can invest modest or substantial sums — as much as it takes to pay for 100% of college expenses. 529 plans offer an easy way to save for college — if you choose, your account can even be rebalanced automatically as your child ages, providing the ultimate in autopilot investing. Best of all, current guidelines permit tax-free withdrawals for college expenses.* One point that’s often misunderstood: The money within 529 accounts can be used at any school in the country, not just those within the sponsoring state. * Expires 2010 unless extended by Congress.  top
Coverdell Education Savings Accounts Formerly called Education IRAs, Coverdell ESAs now boast a less confusing name (after all, they have nothing to do with retirement) and more generous contribution limits. When first introduced, these accounts allowed annual contributions of just $500 per child, hardly enough to put a dent in college expenses. Now, however, the annual limit is $2,000, making Coverdells a much more attractive option for many families. Coverdells work just like Roth IRAs, except they are intended to be used for education expenses, not retirement. Like the Roth, contributions aren’t deductible, and earnings are never taxed (provided the withdrawals are for education expenses). What’s more, any investment that can go into an IRA also can go into your Coverdell, including stocks, bonds, CDs and mutual funds. One point that’s often overlooked: Though usually intended for college, Coverdells actually can be used for just about any education expense, including private elementary and secondary schools. top
UGMA Accounts The Uniform Gift to Minors Act, or UGMA, is the federal law that allows children to own stocks, bonds, mutual funds and other securities. An UGMA account must be registered in the name of a child, but an adult (usually a parent or grandparent) serves as custodian and is responsible for managing the assets within it. There is no limit on the amount that can be invested in an UGMA account. Contributions aren’t deductible, but the first $750 in earnings are tax free. If the child is 14 or over, earnings above $750 are taxed at the child’s rate, which is usually less than the custodian’s. A potential drawback is that you lose control of UGMA assets when your child turns 18. At that age, your son or daughter can legally use the money however they want. An advantage is that UGMA funds can be used for any expense that benefits your child, not just education. top
Roth IRAs Though ideally reserved for retirement, IRA assets also can be withdrawn without penalty to pay college expenses. The Roth IRA, in particular, is worth considering. Granted, earnings within a Roth IRA will be taxed if you withdraw them to pay college expenses before you either reach age 59 1/2 or have held the account at least five years. So focus instead on your principal — the up to $3,000 you’re entitled to contribute each year. Since contributions are made with after-tax dollars, you can withdraw them at any time for any purpose without tax or penalty. Even better, the IRS assumes that you’re withdrawing your principal first. Only after it has been exhausted will future withdrawals of earnings be taxed. This favorable tax treatment makes Roth IRAs a viable option for supplementing your college savings. Though investment products are available at West Shore Bank offices, they are not deposits or obligations of West Shore Bank. Consequently, they are not guaranteed by any bank and are not insured by the FDIC. Please remember that all investment products involve risk, including the possible loss of principal. top | 
