Each education savings option has different income, estate, and gift tax benefits/burdens. In addition they each have varying flexibility regarding management during your lifetime, if you become incapacitated, and upon your death. You must understand the features of each type of account and make sure that they are set up in a manner that is consistent with your estate planning. 

Coverdell IRAs are easy to set up and fund. However, there are limitations regarding how much you may contribute to such accounts, and many companies do not offer the flexibility needed to coordinate the Coverdell IRA with many typical estate planning arrangements. EE U.S. Savings Bonds have many limitations, and in our experience are not particularly appealing overall. EE Bonds do make for easy gifts, but often create administrative problems down the road.  

UGMA and UTMA Accounts use to be the accounts of choice for education savings as they are easy to set up and previously had income tax advantages. However, the income tax advantages are no longer as useful, and the account ownership is not easily coordinated with most estate plans. Since the student will become the owner at age 18 (with UGMAs) and age 21 (with UTMAs), there is a risk the child will have access to the funds at too young an age.

529 Accounts generally represent the most flexible and advantageous account in which to invest for college. We highly recommend 529 Accounts for their ownership and beneficiary designation options that easily incorporate into any estate plan, as well as their income, estate and gift tax advantages. 529 Accounts also offer an array of investment options that should suit any investor. Prepaid Tuition Contracts also have some of the appeal of 529 Accounts, but are generally not as flexible.

Understanding the features of each education option and how they may fit into your estate plan is critical. Certain options may be better suited to your particular circumstances than others. We can help you chose the right option and ensure the education savings are administered according to your overall estate plan if you are not around to do so when the time comes.