The Answer Guy
(MONEY Magazine) – Q I'd like to start saving college money for my one-year-old twin daughters. I have a broker-sold Virginia 529 account with my four-year-old son as a beneficiary. Can I continue funding one account and divide up the money come college time? --Erik Hoffacker, Wilmington, N.C.
ANSWER Sometimes it makes sense to commingle funds. Not this time. With Virginia's plan, you would save $20 a year in fees by sticking with one account, but since it charges a 5.75% load on new deposits, you'd be pinching pennies while wasting dollars. You'll likely be better off with the no-load 529 plans from your home state, North Carolina; at press time, state legislators seemed close to giving locals a tax break on contributions. (Go to cfnc.org/savings for more info.) If no bill passes, try Michigan's low-expense plan (misaves.com). In either state, three accounts cost no more than one.
Keeping your kids' money distinct offers benefits, says Joseph Hurley, founder of Savingforcollege.com. For example, add more than $12,000 a year to a one-for-all account and you'll owe gift tax, but you can put $36,000 into three kids' accounts tax-free. And you will have to divide up the money eventually, since each 529 can have only one beneficiary at a time. Ah, twins: twice the fun and twice the paperwork.
Q This may sound silly, but I'm worried about what would happen if my broker went bankrupt. Would I be able to get back the stocks I hold through the company? --Michael Fullman, Portland, Ore.
ANSWER Don't sweat it. Subject to a few exceptions and conditions, customers of failed or failing brokerages can get their assets back with the help of a nonprofit industry group known as the Securities Investor Protection Corp.
For SIPC aid, however, you have to make sure that you're writing checks to--and receiving statements from--a SIPC-member firm. If your broker is a large national or regional firm, you can safely bet it's a member, or you can go to sipc.org/who/database.cfm to be absolutely sure. Not all holdings are covered: Stocks, bonds and mutual funds are, but commodity futures and currency investments aren't. You're also protected for only up to $500,000 in assets (including up to $100,000 in cash held for securities transactions), though if you have both a traditional brokerage account and an Individual Retirement Account at the same firm, each would qualify for the half-million-dollar coverage.
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