CHRISTINE & COLIN 1 child, 15 years old Parents Christine and Colin have a 15-year-old son David who is a high school freshman. Born and raised in California, David has his heart set on attending UCLA. Christine and Colin agree that they haven't really planned well or saved enough for his tuition and other expenses. Where did the last 15 years go? With only 3 years left before David begins college, they realized they were behind. David did some research on the Internet and found that the total cost for a California resident to attend UCLA for the 2007 school year is $17,263. At an estimated annual inflation rate of 5%, the cost will be $86,134 for four years. Key Points The UGMA account transferred to David's 529 plan account must continue to be for his benefit. It's important to remember that gifts made to UGMA/UTMA accounts are irrevocable. Redemption of the Series EE bonds may be tax free. The accumulated interest may be included in each grandparent's income for that year. Withdrawals from a 529 plan to pay qualified higher education expenses are federal income tax free. Some states offer state tax deductions to residents who invest in their state program. Check with your state as this may or may not be a factor in your overall planning strategy.		Grandparents Recently, both sets of grandparents had approached Christine and Colin regarding David's college education and offered to help financially. Christine and Colin tallied the amount saved so far. At his birth, each set of grandparents had purchased Series EE Savings Bonds for David for a total of $2,000. There was also $13,000 in an UGMA account, which Christine's dad had set up for young David in the mid-1990s when his business was booming and his estate taxes were projected to be devastating. Over the years, Christine and Colin had also made small deposits into a savings account earmarked for David's education, which accumulated to $6,000. In reviewing their situation with a financial professional, Christine and Colin decided to roll over the EE Savings Bonds, the UGMA proceeds and the savings account into a Pacific Life Funds 529 Plan account and start a systematic savings program. They understand that they will be giving up the U.S. government guarantees associated with the savings account and EE Savings Bonds for the possibility of achieving a better investment return within the 529 plan. Even though David planned on beginning college in 3 years, he would be attending college for 4 years. They created a strategy for the next 6 years. Working with both sets of grandparents and Christine and Colin, their financial professional laid out a plan that everyone could easily live with. They all agreed to make systematic deposits into the 529 plan until David completed his 4 years at UCLA. Colin and Christine would contact their employers and set up payroll deduction programs so that a total of $300 per month could be deposited into the 529 plan. Every year, each set of grandparents would gift $2,000 into the 529 plan. Finally, even David would contribute $30 per month. Assuming the suggested rollovers, transfers and periodic payments were made, all of David's higher educational expenses could be met. Total cost included tuition, room and board, books and fees. Source: CollegeBoard.com
CURRENT ASSUMPTIONS PROPOSED 529 PLAN CONTRIBUTIONS Child #1 David, 15 yrs. old College UCLA Tuition, fees and miscellaneous expenses 2007   $17,263 Total Projected Cost (4 yrs.) $86,134 EE Bonds $2,000 UGMA $13,000 Savings $6,000 Amount Currently Invested $21,000 Systematic Investment $330 every month for six years $4,000 annually for six years ($2,000 per set of grandparents) Lump-Sum Contribution $21,000 (rollovers) Total Amount Invested Total Amount Saved $68,760 (includes rollovers) $86,264 Assumed annual rate of inflation for tuition 5% Assumed annual rate of return for college funding 8%
Hypothetical returns do not deduct fees and expenses such as annual maintenance fees, sales charges or underlying fund expenses associated with 529 plans. This hypothetical example is for illustrative purposes and is not indicative of any investments. Withdrawals for expenses other than qualified higher education expenses are subject to income tax and an additional 10% federal tax on earnings.

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