pochax wrote:i was being driven home by a car service last nite from the airport and the driver mentioned something he did to save up for his kids' college expenses (529s weren't around back then, so he said): he said he put in an annuity (not sure if fixed or variable) in his name, then let them grow tax-deferred, then before they cashed in to pay for college, they transferred ownership to their child's name so that when the child uses the money (presumably little to no income) they would pay virtually no taxes. is this legal? i thought annuities could not be cashed in until the holder is >59 yrs of age (or some retirement-range years). i am wondering if i misunderstood him because this sounded too easy a way to avoid taxes.
Yes, common sense should suggest this approach would not be allowed. Tax deferred savings plans are generally not transferrable, except at death or as part of a QDRO (divorce decree).
This 'transfer it to your kids' strategy is usually used to sell some form of cash value life insurance, such as a VUL, where the sales line goes something like "....make annual contributions to protect your life while savings, tax free, for your children's education...", or something equally silly.