Name: Mrs. Michelle L. Stephens - Oklahoma Christian University

an enrollment kit by calling (888)718-7878 or visiting the websiteat www.independent529plan.org. Thenpurchase a certificate that guaranteesa certain percentage of tuition, whichvaries depending on each of the 250participating institutions’ current tuitionand certificate discount rate set by thatcollege for the year the certificate waspurchased. (A certificate purchased for$10,000 might guarantee a year’s worthof tuition at College A or one-half year’stuition at College B.)The website provides a tool tocalculate the tuition benefit at differentmember colleges. Students choose theircollege after they have applied andbeen accepted through the standardadmission process. (Oklahoma Christianis an Independent 529 Plan participatinginstitution).Certificates are held for three yearsminimum before redemption and aretransferable to other family members,including first cousins and in-laws.After one year, they may be refundedor rolled over into another 529 plan;withdrawals used for enrollment at nonmembercolleges, including publics, arenot subject to federal income tax.The Independent 529 plan offersseveral unique advantages. First, theIndependent 529 plan charges no feesof any kind to the consumer. Second,colleges must offer a minimum of 0.5percent per year off current tuitionrates. Third, because it is a prepaidtuition plan instead of a savings plan,your investment is protected against anymarket risks. Assuming tuition increasescontinue at their historical rate, theIndependent 529 plan may provide thebest financial return possible.Coverdell Education Savings AccountCreated in 1997 as Education IRAs,and improved dramatically in 2001,Coverdell ESAs are a compelling savingsvehicle for parents who meet the contributionlimits. Parents filing jointly withadjusted gross income below $190,000may contribute up to $2,000 per child,per year, to a Coverdell ESA.The contribution is not deductible,but all earnings grow tax-deferred, to bedistributed tax-free if used to pay thebeneficiary’s college expenses. $2,000per yearmay not seem like much, but it adds upif you start early. Contributing $2,000 peryear for 18 years with an earnings rateof 10 percent would accumulate around$100,000.While both Coverdell ESAs andSection 529 plans offer the prospect ofpotentially tax-free earnings, Coverdellsoffer the flexibility to choose the specificinvestments you desire, unlike Section529s. This is a big advantage for thosewho want to direct their own investmentprogram. (Most fund companies orbrokerages can set up a Coverdell ESAfor you, allowing you access to their fullrange of investment products).In addition, the favored tax treatmentof Coverdell earnings extends to coverelementary and secondary schoolexpenses. The list of qualified expensesis lengthy and includes obvious items liketuition and books, as well as non-obviousitems like uniforms, transportation,computers and Internet access for thefamily during the years the beneficiary isin school.Contributors now are allowed tocontribute to both a Coverdell ESAand Section 529 plan in the same year(although contributions to both typesof plans are combined for gift taxpurposes). This is great for parentswho want to save more than the $2,000per year allowed in a Coverdell, or forparents who want to save for collegein a 529 plan while also saving forelementary and secondary school costs ina Coverdell ESA.College FundingOptions forGrandparents:Grandparents paying collegeexpenses for grandchildren havean additional option by fundingan Oklahoma Christian UniversityDeferred Charitable Gift Annuity.Oklahoma Christian can restructurea standard gift annuity agreementso that instead of payingincome to the donor over one ortwo lifespans, the gift annuity payoutoccurs over a set number of years,and is payable to the grandchild topay for educational expenses.Here’s how it works. A grandparentmakes a tax-deductible gift toOklahoma Christian. OC then issuesa deferred gift annuity agreementthat will pay income to the grandchildduring his or her college years.This arrangement is especiallyattractive when funded with gifts ofhighly-appreciated property such asstocks or land. These gifts escapemuch of the capital gains tax thatwould normally be paid if the assetwere sold outright and the moneywas given directly to the grandchild.In addition to the friendly capitalgains tax treatment, an OklahomaChristian University Deferred CharitableGift Annuity also will providean excellent income tax deduction– even moreso than a standard giftannuity agreement since the annuitypayout is compressed into a shorterterm.For more information, or toreceive a personalized OC CollegeGift Annuity illustration, contactStephen Eck at (405) 425-5118 orby email at stephen.eck@oc.edu.Transforming lives for Christian faith, leadership, and service.VISION SPRING 2006 10