Save for college, lessen the tax burden

Since I’ll be writing a column periodically for the Sun Advocate’s Business page, I would like to introduce myself, my name is Gary Meeks. I’m a financial advisor with Meeks Financial LLC located in Price.  I have a bachelor’s degree in Finance from BYU, and a professional designation of RICP, and 25 years of experience as a financial advisor.
The topic I would like to discuss today is college savings plans.
My first suggestion is start saving early, the miracle of compounded returns (earning interest on your interest) really does work!  
There are several ways to save for college, I’ll mention two of the most effective here. With the 529 College Savings Plan, you’re the owner and make the decisions, the minor is the beneficiary, the person for whom the funds will be used to pay college expenses. By the way you may change the beneficiary at any time.
 The money will most likely be invested in mutual funds or possibly a principle guaranteed option, you will likely have many options.
A great advantage the 529 plan has is that your contributions plus earnings accumulate tax free and come out tax free if used to pay for qualified higher education expenses; this usually includes tuition, books, computers, and room & board. If the funds are used for non-qualified education expenses, taxes and a 10 percent penalty may apply.
A person can contribute up to $15,000 ($30,000 if filing jointly) each year for the benefit of one beneficiary without incurring gift tax liability, or up to $75,000 ($150,000 if filing jointly) in one year if a five-year election is made.
The Uniform Transfer to Minors Account or UTMA is another option worth considering. By making contributions to this type of plan you are making a gift to the minor and the minors tax id is used for tax purposes. The gift tax annual exclusion is $15000 for 2018, meaning you can give gifts in that amount without any tax consequences. Where the 529 plan is specifically earmarked for college, the UTMA account funds can be used for a variety of things, college expenses, first time home purchase or whatever benefits the minor.
Once the minor reaches the age of majority, which is 18 in Utah they can take control of the account.   While the UTMA account does not have the same tax advantages that the 529 plan has, there are potential tax benefits.  During the accumulation period earnings will be taxed at the minor’s tax rate, and some earnings may even be tax free, consult with a tax expert or financial advisor for more details.  
You can fund the UTMA using mutual funds, bank savings accounts, or just about any time of investment vehicle.
A final word, if your kids are already in college and you don’t have college savings, but still want to help out, you may withdraw funds from a Roth IRA or Traditional IRA without incurring the usual 10 percent penalty for early withdrawals before 59 ½ years old. Personal tax situations vary so consult your tax advisor.
Gary D. Meeks, RICP is a financial consultant with Cetera Advisor Networks LLC, member FINRA/SIPC. Contact him at 435-637-8160 or at meeksg@ceteranetworks.com. He is located at 90 W 100 N Ste. 6 in Price. Cetera is under separate ownership from any other named entity.