Ballantyne Magazine

FALL 2010

Ballantyne Magazine covers news, events, real estate, restaurants, shopping, health, schools and business in the upscale Ballantyne Area of Charlotte, NC.

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Tax Credit, which in 2010 offers up to $2,500 for qualified education expenses. "Higher income limitation phaseouts now apply, so more families can benefit. I counsel clients how to balance 529 distributions with other savings they take out to maximize the benefit from both the 529 and tax credit." "If you're not eligible to claim the credit based on your income, consider not claiming the personal exemption for your child, and having the child claim the education credit on their return, assuming they have income and pay taxes." STEPHEN RATCLIFFE: Tap the cash value of a permanent life- insurance policy. "You can either take a loan or a distribution. If you want to eventually put that money back into the policy, you can take a loan. If you don't want to replenish it, then you can take a distribution and not pay it back; however, this option will reduce the policy's death benefit." 4 Funding by a Parent-Owned Business PAUL BASS: Hire your teenage children and have them open a 401(k). Legal issues, such as how the company is structured and plan type, must be addressed first, however. "Depending on the answers, they could choose from a number of retirement vehicles. The kids could contribute, with that money growing tax-deferred, and when taken out, there is no penalty for qualified education expenses." Consider tuition reimbursement. "Each family- owned company can set up tuition reimbursement, which in 2010 is up to $5,250 per employee. The company writes it off as an expense and it is FALL 2010 not treated as income to the beneficiary." 5 Dipping into a 401(k) The experts agree: Do this only as a last resort. ROBERTA CIANFRONE: "If you leave your job or are terminated, you usually have only one or two months to repay the loan. If you can't, it goes into default. The loan plus current interest is then treated as a taxable distribution to you, and you owe taxes on it. This creates a negative ripple effect on your finances." "Another downside is that depending on the plan's provisions, you're prohibited from making additional contributions until the loan is repaid, for a period of time, say 12 months. Not only are you taking money from your retirement account, the loan limits your ability to contribute additional dollars. If your employer is matching, you're losing out on that free money." DOUG WOODRUFF: Contributing the max you can to a 401(k) is crucial to retirement saving. "Not only do you get tax benefits, but the return from the matching. If your employer matches 50 cents on the first six percent of contributions, in the first year that's like getting a guaranteed 50 percent return, which is hard to come by." 6 Gifts from Family and Friends WIL BROOKS: "Make education saving a family affair. When birthdays and holidays approach, encourage family and friends to use all or part of the money they would spend on a gift for your child toward a contribution to their 529. Send an e-mail with all the information they need to do that." CELEBRATING TEN YEARS 2000-2010 BALLANTYNE MAGAZINE 71

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