Should I use my high expense ratio PA 529 vs the cheaper vanguard (Nevada) plan for asset protection?

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HeyAnesthesia
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Joined: Sun Dec 31, 2017 10:02 am

Should I use my high expense ratio PA 529 vs the cheaper vanguard (Nevada) plan for asset protection?

Post by HeyAnesthesia » Sun Dec 31, 2017 10:46 am

Pennsylvania offers asset protection from creditors if I invest in my home state 529, but their expense rations are nearly double Vanguard's Nevada options (0.33 for the PA 529 total stock fund vs 0.18 for vanguard). I am a physician with good malpractice insurance (3M limit, 1M per occurrence), but there is always the possibility of a catastrophic injury resulting in a high dollar lawsuit that exceeds my coverage.

A lawsuit of that nature would be unlikely, but still entirely possible. Any advice on whether I should pay the higher in state fees for the extra security?

For reference:
Vanguard options
https://investor.vanguard.com/529-plan/ ... nd-returns

PA 529 options
http://www.pa529.com/pdf/ip/IP-Disclosure-Statement.pdf

Silk McCue
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Re: Should I use my high expense ratio PA 529 vs the cheaper vanguard (Nevada) plan for asset protection?

Post by Silk McCue » Sun Dec 31, 2017 12:18 pm

That’s $33 vs $18 annually per $10k invested.

The price for peace of mind is $15 per year on each $10k in the account. Seems like it might be a reasonable price to pay.

HeyAnesthesia
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Joined: Sun Dec 31, 2017 10:02 am

Re: Should I use my high expense ratio PA 529 vs the cheaper vanguard (Nevada) plan for asset protection?

Post by HeyAnesthesia » Sun Dec 31, 2017 12:48 pm

Alternatively that's $150 per 100k per kid (currently 2). I anticipate sinking the max allowed into these accounts ($70k lump sums every 5 years). If I were to start doing that next year, my expenses would conservatively be (excluding market gains for simplicity) $210/year starting next year, then $420/year x 5 years, $620/year until college. That means without even factoring in market gains and reinvestment I'm looking at $6,000 in additional fees between the two kids.

Silk McCue
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Re: Should I use my high expense ratio PA 529 vs the cheaper vanguard (Nevada) plan for asset protection?

Post by Silk McCue » Sun Dec 31, 2017 1:50 pm

HeyAnesthesia wrote:
Sun Dec 31, 2017 12:48 pm
Alternatively that's $150 per 100k per kid (currently 2). I anticipate sinking the max allowed into these accounts ($70k lump sums every 5 years). If I were to start doing that next year, my expenses would conservatively be (excluding market gains for simplicity) $210/year starting next year, then $420/year x 5 years, $620/year until college. That means without even factoring in market gains and reinvestment I'm looking at $6,000 in additional fees between the two kids.
Sounds right and seems reasonable. That is the cost of the “peace of mind insurance” to protect your children’s college fund should you suffer a massive lawsuit. By the time they start college your market gain or loss in one day could be that amount.

Compound
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Re: Should I use my high expense ratio PA 529 vs the cheaper vanguard (Nevada) plan for asset protection?

Post by Compound » Sun Dec 31, 2017 2:02 pm

Seems like a high price to pay for insurance for what sounds like a very unlikely event. If a catastrophic suit did wipe you out, seems that the children would still have loan options (and the FAFSA should be highly favorable to them if you had no assets).

multiham
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Re: Should I use my high expense ratio PA 529 vs the cheaper vanguard (Nevada) plan for asset protection?

Post by multiham » Sun Dec 31, 2017 2:08 pm

No one can answer this question but you. You have all the numbers you need to make the decision. Is the peace of mind worth more to you than $6,000? The fact that you even thought about the catastrophic example tells me your peace of mind may be worth more than $6,000.

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