Saving for kids' college

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Saving for kids' college

Post by chrisraye »

I'm a Canadian citizen currently living in the US but may one day return to Canada. What are some of the college savings vehicles I should consider given that my kids may want to opt for schools in the US or Canada? It would appear that 529 Plans or Coverdell ESAs would lose all of the their tax-deferred earning potential if I moved back. Perhaps tax efficient mutual funds?

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Post by bizkit »

I've spent a lot of time looking into this, and there's really no way to cover both bases (US and Canada). If you contribute to 529, you'll have to pay pentaly if your kids go to Canadian schools. I don't like Coverdell ESAs because you lose control of the money, if you want to cash out, it goes to the beneficiary instead of back to you. Also if the beneficiary doesn't go to college, they can take that money and spend it on whatever they want.

Right now I am just putting all the money I would save for their college into a brokerage account. If I have to cash out I'll have to pay long term capital gains taxes which aren't too bad.
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Post by nelsona »

I would only add that not ALL 529 plans have 'penalties' for foreign schooling, so long as the school is recognized in US (most BIG Cdn universities are).

There may, of course be tax consequences for the student -- if at that time considered a resident of canada -- which may be tantamount to a penatly, but this is not universal.

Genearlly though, a plan which avoids these scheemes (RESP, ESA, 529) would be most flexible for the PARENT.
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
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