College Funds in Place: What to Tap First?

Peter and Jodi, a two-career couple, adopted a girl from Guatemala nine years ago. Anna has embraced school work and is an outstanding student. Her college counselor has pointed her toward top private colleges. Peter and Jodi, both IT professionals with public companies, have substantial assets they can tap for college. The question is, which funds should they tap and in what order?

Through a combination of company wealth, college savings and personal investments, they have earmarked $250,000 for college costs, including:

  • Peter’s ISO stock options that vest in 2018
  • Equity held in “his” and “her” company stock
  • 529 plans established by Anna’s grandparents
  • Funds held in joint accounts

There are questions that loom large in considering how to facilitate tuition payments.

  • Should 529 assets be used first?
  • When it comes to company stock, should his or hers be sold?
  • How will taxes figure into the equation?
  • Tuition payments are due in August and December. How can we make sure funds are available when tuition is due?

Through their financial advisor at SFG Wealth Planning Services, Inc., they developed a plan to consider the investment, tax and liquidity considerations and determine which funds to tap first. They devised a schedule for tuition payments and matched sources of funds based on these considerations.

At SFG Wealth Planning, we draw from our training in financial planning, executive compensation and investments. We would be happy to discuss the particulars of a drawdown schedule with you, which may be appropriate for college planning, retirement or another long-term need.
Mr. Steege is President of SFG Wealth Planning Services, Inc. (SFG), a fee-only financial planning firm. Founded over 20 years ago, SFG is dedicated to assisting senior executives and their employees with their complex stock-based compensation and planning challenges.

*The name, likeness, and circumstances in this example are a fictional composite of facts from executives similar to actual SFG Clients.

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Executive Compensation, Non-Qualified Deferred Compensation, Performance Stock Units, Restricted Stock Units, Retirement Planning, Stock Options

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