Your adoption journey involves a lot of paperwork and official actions. Here’s one more item you might want to plan for: setting up a college fund for your new adopted child. In Arkansas, the Arkansas 529 plan is a great way to do this.
An Arkansas Brighter Future 529 plan is a tax-free savings plan. You can fund it in different ways — deposit whenever you want or set up recurring deposits for regular contributions. Your child can then use the funds for tuition, books, computers, and other educational expenses. In Arkansas, this can include tuition for private elementary and secondary schools as well as colleges or technical schools.
Can I set up a college fund before I adopt?
Setting up an Arkansas 529 plan requires the name and Social Security number of the child. If you are adopting a child who already has a social security number and you do not intend to change the child’s name after adoption, you can set the college fund up ahead of time. If you plan to adopt a newborn, you will need to wait until Baby has a social security number. Equally, if you plan to change the child’s name after adoption — as many adoptive parents do — then you will need to wait.
How to set up a college fund
You can fill out the forms online. Before you start, make sure that you have the child’s name and Social Security number, your own name, address, and birth date, the name and birth date of our spouse or another adult to take care of the account in the event of your death, and your bank information, including routing number.
If you use checks, you will find your routing number printed on the check. If not, you can Google it with the name and address of your bank.
Click through the link at the top of this section and fill out the forms. You’ll provide information about yourself, your beneficiary, and the other adult who will manage the account if you should die. You’ll also arrange how you want to fund the account. You can invest a lump sum or set up regular payments into the fund.
Investment decisions
The Arkansas 529 plan offers a number of different investment options. There is a straightforward government savings plan, a number of different stock portfolio options at different levels of aggressiveness, and plans designed on the basis of the child’s expected graduation year. These can range from 20 years in the future to the Commencement Plan for current college students. Each plan includes a range of years, since it cnn be difficult to anticipate a precise graduation year.
Choose your plan on the basis of your personal level of risk tolerance. Talk with your financial advisor, too; there may be tax advantages, depending on your circumstances.
If your child decides not to pursue higher education, you can usually transfer the account to another family member. However, there are limitations on how the funds can be spent. As with any investment, you should make sure that you understand all the details and how they will apply to your particular circumstances.
Are there alternatives for college funds?
Absolutely. From prepaid tuition plans to simple savings accounts, there are many ways to set up a college fund. Arkansas 529 plans allow tax-free growth and tax-free withdrawals for educational purposes. They can be started with a modest investment and offer quite a bit of flexibility.
Talk with your financial professional to compare different options. For the details of your adoption, you’ll need an adoption professional. Heimer Law is a specialized adoption attorney with extensive experience in Arkansas adoptions. Contact us for a free consultation.
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