Guidance is appreciated

**Mr. Motivated** · 10-16-2012, 06:53 AM

I'm no expert but I would suggest a CD. You can get say a 2 year cd with half the money (for the junior) and a 4 year cd with the other half of the money (for the 8th grader). Only suggesting this because you know roughly when you will want to have the money by and a CD will let you keep in in a secure place, earn some interest on it, and be readily available when you want it.

But like I said I'm absolutely no expert! Hope I helped some??? Good luck!

**Like2Plan** · 10-16-2012, 07:23 AM

Originally posted by buckey3 View Post

I will provide the bullet point details and hopefully this will help bring clarity on our dilemma on how to handle receiving $157,000 net from a settlement.

1) Only debt we have is our mortgage
2) We have a nice size trust ( greater than $2.5mm ), but isn't touchable until we are 60, currently we are 43.
-both 1 & 2 were stated to avoid recommendations to paying off CC's, HEL, retirement, etc...
3) Family annual income is $185K - only stating this in case income level impacts options
4) We would like to take all of this and put into something for our kids ( a HS Junior and an 8th grader ) education but don't know what the tax implications may be
-don't understand the 529's, Roth IRA, EdVest and

Bottom line: What would be the best investment strategy given this nice windfall?

Thank you in advance for your suggestions.
Tracy

buckey3,
You have provided some details, but really not enough to provide good solid advice on the tax implications. Do you have a certified financial planner? It sounds like you have some investment goals for your kids college. Even if a 529/Roth IRA/Edvest is a good idea, there are limits on how much you can invest there each year.
Some states allow a state tax write off for investments made on their 529 programs. But, you may be better off not investing in a 529 at this point because you may be eligible for education write offs on your federal taxes that would exceed the state tax write off. (Maybe you are not even in a state that has state taxes?) Your modified adjusted gross income is the determining factor for federal tax education taxcredits.
A CFP should be able to look at your whole picture and make some recommendations based on your time horizon and tax implications.

**dontgopoor** · 10-16-2012, 10:30 AM

Originally posted by buckey3 View Post

I will provide the bullet point details and hopefully this will help bring clarity on our dilemma on how to handle receiving $157,000 net from a settlement.

1) Only debt we have is our mortgage
2) We have a nice size trust ( greater than $2.5mm ), but isn't touchable until we are 60, currently we are 43.
-both 1 & 2 were stated to avoid recommendations to paying off CC's, HEL, retirement, etc...
3) Family annual income is $185K - only stating this in case income level impacts options
4) We would like to take all of this and put into something for our kids ( a HS Junior and an 8th grader ) education but don't know what the tax implications may be
-don't understand the 529's, Roth IRA, EdVest and

Bottom line: What would be the best investment strategy given this nice windfall?

Thank you in advance for your suggestions.
Tracy

Posts like this one make me wonder whether someone is seeding this forum. But I'll take the post as authentic.

With you're income level and apparent large net worth, I'd suggest you visit with a reputable estate attorney. Look on the web and ask your friends for suggestions. Church bulletins often have some listed. Check the web and the department within your state that monitors attorneys for any problems/complaints - you'll be surprised how easy it is to find news articles about fraud, malfeasance, etc.

The estate attorney, along with a tax accountant that may be on their staff or with whom they have a relationship, will know exactly how to handle setting up something for your kids that makes sense given your other assets.

But don't get tempted into putting money into any special investments - if either the attorney or accountant starts to suggest buying into partnerships or annuities or anything along that line, you have the wrong people. Find someone else quickly. Their advice should focus on how to minimize the tax impacts as well as how to name your spouse and kids on the asset (beneficiary designations).

You could then post their recommendations for comments.

**buckey3** · 10-17-2012, 01:26 PM

Many thanks

Dear dontgopoor,

I'm from Wisconsin and have truly been blessed. I come from a blue collar family and married my high school sweetheart who's father literally made his fortune after the age of 55 green fielding his own company, hence the trust. The settlement is because my wife almost died from a pulmonary embolism from a birth control pill that was not promoting all the side effects. I can't disclose their name due to the legal documents we had to sign. I say this, because I wanted you to know I really appreciate your insight and I'm not some jerk off trying to waste decent people's time. I considered a CFP, but I have heard horror stories. I am going to talk with some of my friends whom are attorneys and get some recommendations from them. I will post their advice for others to use once I have it.

Kindest regards,
buckey3
Wisconsin

**Like2Plan** · 10-17-2012, 01:50 PM

Originally posted by buckey3 View Post

I considered a CFP, but I have heard horror stories. I am going to talk with some of my friends whom are attorneys and get some recommendations from them. I will post their advice for others to use once I have it.

Kindest regards,
buckey3
Wisconsin

Great! Not all CFPs are equal. But, there are a couple CFPs who occasionally post on this forum that give me hope that there are some really good ones out here. You should find someone that is fee only as opposed to one who makes $$ on commissions from products sold to you.
Sounds like you are on the right track.

**MonkeyMama** · 10-17-2012, 05:18 PM

How old are the kids??

Good CFPs exist, but are extremely hard to find. Hopefully attorney friends will be of help.

It looks like there is a state deduction for 529 plans in Wisconsin. This probably makes the most sense given the large amount of money you have to set aside, and your income tax bracket. (You may have to invest in Wisconsin 529, which may or may not be a good thing, in order to get the state deduction).

I am not a huge fan of 529 plans because they are expensive and restrictive, but this is the kind of situation where the tax breaks will probably overcome most the downsides. Be careful to read up on rules and restrictions if you decide to go this route.

You are likely ineligible for a ROTH (due to income) and ESAs are only $2k per year contributions limits, so not very helpful in this case.

All of the above said, this still largely depends on how old your kids are and what their likely college path is. If they are teenagers, you won't get a lot of tax benefit (only a few years or earnings - as only the earnings on the 529 plans are tax free). If they are younger, the 529 plan may make more sense. Off the top of my head, you can set aside $65k per kid without any gift tax ramifications (double this, since you are married) - into a 529 plan. You have to file a gift tax return even so - just logistics though no actual tax. If the money is not used for college, the earnings that have accumulated will be penalized (@ 10%). So, if kids are older, but you are okay keeping the money for their kids (or using for other relatives), then this may be a good choice. If you want your kids to have flexibility to do other things with the money, then don't put it all in a 529.

You might be best to just be wary of gift tax limits ($13,000 per year, per person) and to come up with a plan to move the money to each kid at $26k per year (per married couple).

Here is a good summary on 529 plans - scroll to bottonm for gift tax mention.

529 plan - Wikipedia, the free encyclopedia

P.S. I also hope you are aware of tax ramifications of this settlement.

**Ramose** · 10-17-2012, 06:01 PM

I would definitely be talking to a financial advisor about this, only because the size of figures could lead to some sizable tax implications. You don't want to make a mistake and lose a chunk to the tax office.

**ecoadapt** · 10-17-2012, 06:25 PM

Originally posted by buckey3 View Post

Dear dontgopoor,

I'm from Wisconsin and have truly been blessed. I come from a blue collar family and married my high school sweetheart who's father literally made his fortune after the age of 55 green fielding his own company, hence the trust. The settlement is because my wife almost died from a pulmonary embolism from a birth control pill that was not promoting all the side effects. I can't disclose their name due to the legal documents we had to sign. I say this, because I wanted you to know I really appreciate your insight and I'm not some jerk off trying to waste decent people's time. I considered a CFP, but I have heard horror stories. I am going to talk with some of my friends whom are attorneys and get some recommendations from them. I will post their advice for others to use once I have it.

Kindest regards,
buckey3
Wisconsin

Posting the advices given to you would help a lot. That's a good move.

**dontgopoor** · 10-21-2012, 06:38 AM

Morningstar Names Best 529 College-Savings Plans for 2012

This Morningstar article provides some great and current information about 529 mgt costs. I recall reading another Morningstar article that covered the contribution limits and some strategies.

**chrisburke21** · 10-21-2012, 05:02 PM

Cfp

I agree that you should talk to a financial planner. Check out these sites. There is some good information on questions to ask when talking to a cfp. Also, you don't have to see only one. If something doesn't seem right get a second opinion

Finding financial help - Money 101, Lesson 15 Money Magazine

Finding financial help - Money 101, Lesson 15 Money Magazine

Certified Financial Planner Board of Standards Inc. - How to Choose a Planner

Hope this helps

Guidance is appreciated