Join the presenter, Troy Onink and other participants following Wednesday's Live Virtual Seminar (7/16,3:00 PM ET) as they share thoughts about the presentation.

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 Is there a minimum age requirement for employing your child to utilize this strategy as presented?

-MGL in Glenview

 On behalf of FPA, I'd like to thank Troy Onink for his time today. We did have a few remaining questions from the call, and I'm including those below:

Sudha writes: How is this strategy better than 529 plan in case of high income clients?  Either way, they will not be eligible for FAFSA aid because of their income.

John asks: Why have ESAs seen there day? Then are 529s best funding vehicle out there?

Tim asks: Can you please clarify why we would want the child to take the personal exemption instead of the parents? At the parent's higher tax rate? Is the main reason to avoid kiddie tax?

Would it makes sense to try this approach with a W2 employee with highly appreciated stock?

 There is not specific age minimum, but wages have to be reasonable and prudent in the view of the IRS while also complying with child labor laws. The best suggestion is to consult with the client's tax advisor. With that said, clearly young children get paid handsome sums for modeling, acting, etc, so age is relevant to what they are being paid to do.

Thank you for the question.

- Troy

Sudha,

You can only put cash in a 529 plan. So if the parents have appreciated assets and sell them they have to pay tax on those assets just to put the net proceeds in the 529 plan. This is an example of using what the parents already have, and how to reduce the overall tax in the process of paying for college. It was not a statement about which is a better way to go, this strategy vs. 529 plan, from a savings standpoint. So, if the parents want to start saving and they likely won't qualify for aid they can save in whatever gives them the best rate of return with the least amount of tax because aid is not a consideration. Also, I stated that this example was appropriate for families that are not likely going to qualify for need-based aid. If there income is too high they won't qualify for aid regardless of where they save and invest.

John,

With many of the current favorable tax and private school benefits associated with ESA's sunsetting at the end of 2010, and not even a shred of discussion about extending these benefits - these accounts will lose a lot of appeal going forward. Back to $500 maximum contributions, not tax free for private school, etc.

Tim,

In the example we showed the child taking the Personal Exemption becuase via the Support Test the child should take the exemption because he was providing greater than half of his support. The tax savings takes into account that at the higher incomme levels that the parent can still receive a portion of the PE, but in this case was not able to because the child passed the ST.

Yes, as I said on the call, you don't have to be a business owner to shift unearned income, like capital gains, so affluent clients with appreciated assets are ideal candidates for this strategy.

Hope these answers help.

All the best,

- Troy

 Followup: Do you then view 529s as the best funding vehicle or would you say the best funding vehicle for cash or new money; while gifting appreciated assets would be beneficial if available as an option?