Meet Two Of Our Young Investors
Alex and Maggie are already saving for college and own Real Estate! How? They both have a Coverdell Education Savings Account (CESA) that co-owns a Mobile Home and RV Park called Copper Creek.
By having their CESAs own this mobile home park, any income that is generated from rent, utilities and any other charges that occur funnel right back into their accounts. These funds continue to accumulate for the duration of ownership of the park and the account. One great thing is, all of the funds are growing tax-free! The second, Maggie and Alex will have these funds available to them, as they are needed, until they reach the age of 30.
Maggie isn’t quite ready for middle school, let alone high school or college, so she can use funds from her account to pay qualified expenses from the start of kindergarten, which are also tax-free. When Maggie and Alex are ready for college, their CESAs will have minimal impact on financial aid.
When withdrawals are taken out of the CESA for qualified expenses such as supplies, tuition and fees, the account there is no federal income tax that needs paid on those qualified expenses. If funds are withdrawn for unqualified expenses they are considered taxable income and may incur the 10% penalty.
Contributions can still be made to the account as well, up to $2,000 a year from all sources. Does the money coming in from the park count towards the $2,000 a year? No, they don’t! Because the funds from the park are considered investment money, it has no effect on the contribution limit. There is also no cap on that invested money.
If you are the parent or legal guardian of a child under 18 years old you can open an account for them. There is no better way to make sure your children will be able to go to the school of their choice and not have to worry about how they will pay for college. It also takes the pressure off you when they do pick that pricy school.
The kids are even giving back to the community of the park! Over the weekend the park had its annual picnic where Alex and Maggie gave each of the kids that live in the park their own custom back packs filled with great school supplies. The picnic was a blast and the kids loved the backpacks. Did you know that goats are great landscapers? I didn’t until I learned Alex and Maggie are doing just that! Not only are the goats helping with maintenance of the park, the kids love them and the goats are happy. Sounds like a win-win to me.