TEMPTING - college savings accounts - Brief Article - Statistical Data Included

Kiplinger's Personal Finance Magazine, June, 2000

Q&A | Handling a COLLEGE-SAVINGS PLAN that's growing too fast.

To save for college, I opened Janus Mercury fund accounts for my three children under the Uniform Transfer to Minors Act (UTMA). Investing $100 a month has produced some spectacular results (more than $20,000 for the eldest child). I am now having second thoughts about the wisdom of turning over $40,000 to $50,000 to them on their 18th birthdays, with the hope that the money will be used for college. Can I legally shift a good portion to a state college-savings plan? What are the tax implications? -- KEVIN MEEHAN, Lakewood, Ohio

This is tricky. Although you can move the money into a college-savings plan, you can't take away rights your children have under their custodial accounts.

John McCabe, legal counsel for the National Conference of Commissioners on Uniform State Laws, says the children must be made the beneficiaries of the college-savings plan. And parents can't transfer savings from one child's account to another's if the first one doesn't go to college--an option for parents who start saving with a college-savings plan. Also, each child should retain the right to get the money at age 18 or 21, whichever is the rule under the custodial" account. (In Ohio and most other states, it's age 21 .) Your child may use the money for college or pay the penalty for not doing so.

The enforcement of these rules, however, is fuzzy. It's up to the custodian to obey the spirit of the UTMA rules, but a child who discovers you haven't could take you to court.

Another complication: the tax bill. You need cash to invest in a college-savings plan, so you'd have to sell the mutual fund shares first. If your children are at least 14 years old, the profits would be taxed at their rate; if they're younger, your top tax rate would apply. If switching seems too much of a hassle, consider keeping the UTMA money where it is and depositing new contributions into a college-savings plan. --KIMBERLY LANKFORD

BORROWING: Low loan rates around the U.S.

Philadelphia                LENDER

Fixed-rate 30-year     Commonwealth Bank
One-year ARM           Commonwealth Bank
Home-equity line       Summit Bank
Car loan               Farmers & Mechanics

Nashville

Fixed-rate 30-year     First American National
One-year ARM           Cavalry Banking
Home-equity line       SunTrust/Nashville
Car loan               Union Planters

Detroit

Fixed-rate 30-year     National City Bank
One-year ARM           Standard Federal
Home-equity line       Comerica Bank
Car loan               National City Bank

Salt Lake City

Fixed-rate 30-year     Washington FS&L
One-year ARM           Bank One/Utah
Home-equity line       Washington Mutual
Car loan               Washington Mutual

Portland

Fixed-rate 30-year     U.S. Bank
One-year ARM           Bank of the West
Home-equity line       Washington Mutual
Car loan               First FS&L of McMinnville

Philadelphia           RATE/DESCRIPTION (INDEX PLUS MARGIN)

Fixed-rate 30-year     7.5%/3 pts.
One-year ARM           5.5%/3 pts. (Treasury index + 2.75)
Home-equity line       7.25%/6 mos., $5,000 minimum (prime + 0.5)
Car loan               8%

Nashville

Fixed-rate 30-year     7.88%/1.88 pts.
One-year ARM           6.25%/1 pt. (Treasury index + 2.75)
Home-equity line       6.5%/6 mos., $10,000 minimum (prime + 1)
Car loan               7.99%/$100 fee

Detroit

Fixed-rate 30-year     7.63%/1.88 pts.
One-year ARM           5.5%/2 pts. (Treasury index + 2.88)
Home-equity line       6.9%/thru 8/00, $5,000 minimum (prime + 2.25
Car loan               9.24%/$75 fee

Salt Lake City

Fixed-rate 30-year     8.13%/1 pt.
One-year ARM           6.4%/1 pt. (Treasury index + 2.75)
Home-equity line       5.99%/6 mos., $5,000 minimum (prime + 0.99)
Car loan               8.25%/1% fee

Portland

Fixed-rate 30-year     7.88%/1.13 pts.
One-year ARM           6.25%/1 pt. (Treasury index + 2.75)
Home-equity line       5.99%/6 mos., $5,000 minimum (prime + 0.99)
Car loan               7.99%

                        TELEPHONE
Philadelphia              NUMBER

Fixed-rate 30-year     800-327-9885
One-year ARM           800-327-9885
Home-equity line       800-773-7676
Car loan               609-387-1150

Nashville

Fixed-rate 30-year     800-743-3262
One-year ARM           615-893-1234
Home-equity line       888-390-2265
Car loan               800-342-8493

Detroit

Fixed-rate 30-year     800-925-9259
One-year ARM           800-466-3800
Home-equity line       800-643-4418
Car loan               800-925-9259

Salt Lake City

Fixed-rate 30-year     801-366-2265
One-year ARM           801-481-5000
Home-equity line       800-756-8000
Car loan               800-756-8000

Portland

Fixed-rate 30-year     800-872-2657
One-year ARM           503-221-2122
Home-equity line       800-756-8000
Car loan               503-472-6171

RATE BENCHMARKS (as of April 6): PRIME: 9% 11TH DISTRICT COST OF FUNDS INDEX: 4.97% ONE-YEAR TREASURY INDEX: 6.3% Survey was conducted April 6. Mortgages are limited to a maximum amount of $2,52,700. Car-loan rates are for 48-month new-car loans of $16,000 with 20% down. For more cities and updated rates, check www.kiplinger.com; click on "Yields & Rates."