Every New Year brings media coverage about the first baby born after Midnight on January 1. Whether it’s the first baby born in the country or the first baby born in a country town, there’s always a headline and a story about this pioneering little soul.
New Maine parents have another reason to celebrate those first babies and every other baby born here. Thanks to the generosity of the late Harold Alfond, babies born in Maine qualify for $500 to start a NextGen account for education beyond high school.
Alfond, founder of the Dexter Shoe Company and the inventor of the factory outlet store concept, wanted to encourage Mainers to pursue a college education by making it easier for their parents to set up an education savings fund. His bequest, known as the Harold Alfond College Challenge, provides a one-time $500 grant for Maine resident babies born after January 1, 2009.
With 13,000 to 14,000 babies born in Maine each year, the Alfond fund has the financial depth to donate as much as $7 million per year. The program is expected to last indefinitely.
No initial or subsequent contributions are needed and no family income restrictions apply. The account’s owner, usually parents or legal guardians, must be at least 18 years of age. Applications for the grant must be made before the child reaches his or her first birthday. Other terms and conditions apply, but no one should be discouraged from seeking this windfall.
The NextGen College Investing Plan is a tax-advantaged way to save for future higher-education expenses and can be used at accredited post-secondary schools. The NextGen Plan is a Section 529 plan administered by the Finance Authority of Maine (FAME). Investment oversight is provided by the Maine state treasurer, and Merrill Lynch serves as the program manager and underwriter.
The NextGen Plan’s earnings grow tax-free from Maine and federal taxes and remain tax-free so long as the withdrawals are used for qualified higher education expenses, such as tuition, room and board, books and supplies and expenses related to special needs beneficiaries. The funds can be used for community college tuitions and costs and for post-secondary trade schools.
Once a NextGen account is established, parents and grandparents can take advantage of a special five-year gift rule to contribute up to $130,000 per couple or $65,000 per individual for each beneficiary. That makes the NextGen account an effective way to reduce estate taxes while helping a college-bound child.
To arrange for enrollment in the Harold Alfond College Challenge, call FAME at 1-800-228-3734 or visit online at 500forbaby.org. The enrollment paperwork takes 10 or 15 minutes to complete and help is available from FAME staff. You can call me with any questions at 778-2981 or e-mail me at lanceharvell@hotmail.com.
