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Should I use my high expense ratio PA 529 for additional asset protection?

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  • Should I use my high expense ratio PA 529 for additional asset protection?

    Pennsylvania offers asset protection from creditors if I invest in my home state 529, but their expense ratios 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

  • #2
    do you get a tax deduction?

    otherwise agree, the likelihood of your 529 being confiscated are low.

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    • #3
      PA is one of only 4 states that allows you to deduct contributions to any state's 529 plan. They tried to limit the provision to only PA this year, so be on future alert.

      Sounds like a layer of expensive malpractice insurance expense to me. I say don't do it.
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4
        I live in PA now and kept my 529 in NY’s plan. Can still deduct although with Pas 3% flat tax it’s not a lot of savings.

        NY’s plan is Currently the lowest cost Vanguard funds.

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        • #5
          I am in the NY plan. 0.15% expense ratio. I agree, highly unlikely this will be an issue, so you probably are better off with the cheaper plan. BUT, if it gives you peace of mind, in reality it’s only 0.18% difference. That’s only $180 per year on a $100k balance. So if you will sleep better at night, it’s probably worth it, but only you can make that call.

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          • #6




            PA is one of only 4 states that allows you to deduct contributions to any state’s 529 plan. They tried to limit the provision to only PA this year, so be on future alert.

            Sounds like a layer of expensive malpractice insurance expense to me. I say don’t do it.
            Click to expand...


            Up to 6 now:

            Arizona, Kansas, Minnesota, Missouri, Montana and Pennsylvania

            PA is a terrible state for malpractice in general BUT it depends on where you practice.  If you're in or close to Philly, keep it in PA.  Never know what those great juries will do.  Are there specific examples that your malpractice insurer can describe in your specialty where the award exceeded coverage?  I'm partial to the CA plan (TIAA funds with 0.08% ER on TSM fund).  But since the fiscal state of PA isn't fantastic (see Mercatus center rankings and details) the legislature will look for any way to get your money, including deductions that primarily wealthy people take.

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            • #7
              I previously practiced in Philadelphia, and now I’m just outside the city limits. I’m also in a high risk field (cardiac anesthesia). Both of those factors have me wondering how much I should be willing to pay to keep my kids’ tuition safe.

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              • #8
                One of my partners posed a good question this morning: should we all just put our 529’s in our wives’ names and keep it in low cost out of state plans?

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