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Wow, this is uncalled for. What evidence do you have that this is the motivation behind this service? Couldn't it also be a way for low-income families to bene

Wow, this is uncalled for. What evidence do you have that this is the motivation behind this service? Couldn't it also be a way for low-income families to benefit from the tax advantages normally only afforded to the wealthy?

chimeracoder 14y ago
I agree that the GP comment is uncalled for - we have no way of knowing if this company will help or hurt families, so let's give them the benefit of the doubt. But let me address your second question. The way that a trust is set up, it's not always the best solution for reducing the cost of college, particularly if you think you will qualify for financial aid (though that's a very difficult projection to make for the year 2030 at this point). The way financial aid is calculated, these assets count against your eligibility. So while having the money won't 'hurt' you in some sense, there's the possibility that you'd receive that money from financial aid anyway, and by saving e.g. $10,000, you've reduced your financial aid eligibility by the same amount. Of course, if you are able to save up the cost of college (>$200,000 for private schools) over two decades - or at least come reasonably close - then yes, it is good to have that money at the end of the term in case you wouldn't have qualified for financial aid anyway, but as you can see, having the fund doesn't necessarily leave you better off than the alternative. The kicker is that the very-wealthy are able to secure vast amounts of financial aid for their children. I went to an Ivy League school, so I'll speak to their policies, as all Ivy League schools but one have the same financial aid policy: guaranteed to meet 100% of 'demonstrated need'. The problem is that 'demonstrated need' is very easy to manipulate if you're savvy enough to know how to reduce your taxable income, reduce your child's net worth to zero (or less), and exploit several other loopholes that are nevertheless entirely legal. The end result is that I had some classmates whose families were wealthy enough to donate tens of thousands of dollars in charitable donations, and yet they also received the top financial aid packages reserved for the 'high need' (ie, very poor) families. All of that is orthogonal to the company we're discussing: it's possible they may help, and it's possible that they may 'do no harm' (ie, it will be a wash for the family). Or they may be able to help educate these families how to take advantage of those same loopholes, but that would be difficult, and it's completely unrelated to the business of simply having a trust.
- jellicle 14y ago
  It's almost certain that putting money in the child's name will serve to reduce their financial aid package. Financial aid, since the system was invented, has always counted assets in the child's name as being highly available to meet college needs, while parental assets are less available. This is going to be true 18 years from now even if the system is tweaked in the meantime. Putting money in a trust fund for your child will reduce their eligibility for financial aid, full stop, no doubt about it.
  - Bricejm 14y ago
    Jeff - Founder/CEO It does reduce financial aid, but only 20% of the child's assets are included. TrustEgg assets also don't have to be used for education, while a 529 plan would assess a 10% penalty for non-education withdrawals. Having the assets in the child's name also protects the assets from the parents, and parents creditors, which is necessary when taking deposits from other family members.
- twakefield 14y ago
  I see your points here, makes sense. However, in my opinion, promoting individual saving for higher education and reducing government subsidies is a positive step. Because of the uncertainty about the situation in 2030 (as you mentioned) and government subsidies tend to lead to unintended consequences (see housing price bubble and collapse). Edit: Also, the money doesn't have to be used for college.
jellicle 14y ago
What tax advantages are those? Low-income families aren't going to be taxed on any of the money they gift to their children.
- Bricejm 14y ago
  Jeff - CEO/Founder - The tax advantage is for the income earned on the investment. The kiddie tax exemption eliminates the the first $950 of unearned income. As long as deposits are less than $13,000 per parent/grandparent each year there are no tax issues for them either.

chimeracoder 14y ago

I agree that the GP comment is uncalled for - we have no way of knowing if this company will help or hurt families, so let's give them the benefit of the doubt. But let me address your second question. The way that a trust is set up, it's not always the best solution for reducing the cost of college, particularly if you think you will qualify for financial aid (though that's a very difficult projection to make for the year 2030 at this point). The way financial aid is calculated, these assets count against your eligibility. So while having the money won't 'hurt' you in some sense, there's the possibility that you'd receive that money from financial aid anyway, and by saving e.g. $10,000, you've reduced your financial aid eligibility by the same amount. Of course, if you are able to save up the cost of college (>$200,000 for private schools) over two decades - or at least come reasonably close - then yes, it is good to have that money at the end of the term in case you wouldn't have qualified for financial aid anyway, but as you can see, having the fund doesn't necessarily leave you better off than the alternative. The kicker is that the very-wealthy are able to secure vast amounts of financial aid for their children. I went to an Ivy League school, so I'll speak to their policies, as all Ivy League schools but one have the same financial aid policy: guaranteed to meet 100% of 'demonstrated need'. The problem is that 'demonstrated need' is very easy to manipulate if you're savvy enough to know how to reduce your taxable income, reduce your child's net worth to zero (or less), and exploit several other loopholes that are nevertheless entirely legal. The end result is that I had some classmates whose families were wealthy enough to donate tens of thousands of dollars in charitable donations, and yet they also received the top financial aid packages reserved for the 'high need' (ie, very poor) families. All of that is orthogonal to the company we're discussing: it's possible they may help, and it's possible that they may 'do no harm' (ie, it will be a wash for the family). Or they may be able to help educate these families how to take advantage of those same loopholes, but that would be difficult, and it's completely unrelated to the business of simply having a trust.

jellicle 14y ago
It's almost certain that putting money in the child's name will serve to reduce their financial aid package. Financial aid, since the system was invented, has always counted assets in the child's name as being highly available to meet college needs, while parental assets are less available. This is going to be true 18 years from now even if the system is tweaked in the meantime. Putting money in a trust fund for your child will reduce their eligibility for financial aid, full stop, no doubt about it.
- Bricejm 14y ago
  Jeff - Founder/CEO It does reduce financial aid, but only 20% of the child's assets are included. TrustEgg assets also don't have to be used for education, while a 529 plan would assess a 10% penalty for non-education withdrawals. Having the assets in the child's name also protects the assets from the parents, and parents creditors, which is necessary when taking deposits from other family members.
twakefield 14y ago
I see your points here, makes sense. However, in my opinion, promoting individual saving for higher education and reducing government subsidies is a positive step. Because of the uncertainty about the situation in 2030 (as you mentioned) and government subsidies tend to lead to unintended consequences (see housing price bubble and collapse). Edit: Also, the money doesn't have to be used for college.

jellicle 14y ago

What tax advantages are those? Low-income families aren't going to be taxed on any of the money they gift to their children.

Bricejm 14y ago
Jeff - CEO/Founder - The tax advantage is for the income earned on the investment. The kiddie tax exemption eliminates the the first $950 of unearned income. As long as deposits are less than $13,000 per parent/grandparent each year there are no tax issues for them either.