The original post predicts what the president will say. Please post what he did say.
Brewha wrote:
Why, when his lips are moving he's usually lying.
But, since you brought it up:
Obamas Pump Up College Savings
Parents Make Big Upfront '529' Investment for Their Daughters' Tuition
By
Jane J. Kim
Updated April 18, 2009 12:01 a.m. ET
Malia and Sasha Obama's college education appears to be taken care of in a massive contribution that the president and first lady made to a "529" college-savings plan in 2007.
But like everyone else, they have likely suffered big losses.
According to their 2008 tax returns, the Obamas took advantage of a unique feature of 529 plans that allows account owners to front-load five years' worth of contributions, $240,000 in total for the two girls. They did so without triggering gift taxes -- now levied on any gift exceeding $13,000 a year. Form 709, the federal gift-tax form, shows that Barack and Michelle Obama made equal contributions of $120,000 each, or $60,000 to each of the two children in 2007.
Senate disclosure forms released last year show that the contributions were made to Illinois's adviser-sold Bright Directions College Savings Program, in two age-based growth portfolios, which are designed to become more conservative the closer the child is to attending college. Assuming that the Obamas haven't changed their investments, one of those portfolios has lost roughly 35% in the past year through March, while the other one is down about 27%.
The filings offer a peek into how the Obamas are planning to pay for college for their daughters, Malia, now 10, and Sasha, seven. College tuition has soared in recent years, with average tuition and fees at private four-year colleges hitting $25,143 for the 2008-2009 academic year, according to the College Board. Meanwhile, average in-state tuition and fees at four-year public universities jumped to $6,585, up 6.4% from the previous year.
In recent years, tax-advantaged 529 plans have become a popular college-savings vehicle for many parents. In a 529 plan, savers put after-tax dollars into an account that typically offers a wide range of mutual funds.
Distributions and earnings are tax-free as long as they are used for higher education. Investors can invest in any plan, although they may get an additional state tax break if they invest in their own state's plan. The Illinois 529 plan, for example, offers a state-tax deduction for contributions.
A spokesman for the White House confirms that a payment was made in 2007 and that the payment, for reporting purposes, will be prorated over five years.
By front-loading five years' worth of contributions, the Obamas also are cutting possible future taxes on their estate since they have gotten $240,000 -- and any future appreciation on that amount -- out of their estate, says Tom Ochsenschlager, vice president of taxation at the American Institute of Certified Public Accountants, or AICPA.
To be sure, not every family has the means to sock away as much money into 529 plans. The five-year gift election is typically used by wealthy individuals or grandparents who want to help pay for college while reducing their taxable estates, says Joe Hurley, founder of Savingforcollege.com. "Most parents don't have that kind of money to put in all at once."
While the Obamas' investments are down with the bear market, there is a silver lining for investors in these plans. Investors who are underwater can liquidate the plan without penalties or taxes. Losses can be claimed as a miscellaneous itemized deduction, which can help reduce investors' taxes to the extent those deductions exceed 2% of their adjusted gross income, Mr. Hurley notes. Those who are in the alternative minimum tax, however, are out of luck since miscellaneous itemized deductions aren't usable under the AMT.
