You saved well, then worried you had never started on college. You had. Private school and college are one twenty year commitment, not two, and this shows the bills as they fall, the funds already standing behind them, and the one account kept purely for tax savings. Move the controls to test it.
No lump sum, no gift tax election, and nothing locked away. Everything below tests this plan rather than proposing a different one.
Funds above the line, bills below it
The shaded bands are the education pool, split by account. It rises for only two reasons, money added and money compounding, and the strip beneath separates them. The dotted line is the rest of the trust account. It is left general purpose, but if the earmark runs dry the college bills fall on it next, so you can watch it get spent before anything is truly short. Bars beneath the line are what leaves each year.
A label, not a transfer. It sets how much of the account is committed, and therefore whether college is covered without dipping into the rest.
Zero today. Household cash flow is close to break-even once private school is paid, so any figure here assumes something changes.
Optional. This does not change the deduction or the funded outcome, only which wrapper the money grows in.
| Starting balances | The 529 at zero, having been drawn down for private school, and the trust taxable account at $350,000. A high-yield checking cushion of $210,000 is treated only as a funding source, wound down to a $100,000 reserve, roughly six months of core living costs. Savings of $60,000 is left out entirely. |
|---|---|
| Checking yield | The checking interest rate is adjustable above and set at 4% by default. It is taxed as ordinary income at a combined 40.8%, being 32% federal, 3.8% net investment income tax and 5% state, so the balance grows at the net rate. Once it reaches the reserve floor the transfers continue at roughly $2,400 a year, which is the after tax interest on the $100,000 being swept out while the principal is held flat. |
| Money added | Two sources. Transfers out of the checking cushion, which stop at the $100,000 reserve, and anything saved from cash flow, which is zero by default because the household is close to break-even once private school is paid. Additions stop after the last college year. |
| Order of payment | College bills are met from the 529 first, then the earmarked slice of the trust account, then the general purpose remainder. Only once the whole trust account is spent does the model show a true shortfall. Neither savings nor the checking reserve is ever spent on education. |
| Private school | Built from the published 2026-27 schedules. Ashbrook charges $17,400 for grades K-3, $17,000 for grades 4-5 and $19,100 for grades 6-12, plus enrollment, curriculum and activity fees of $900 to $1,100. Meridian Day charges $18,500 for grades 1-4, $19,100 for grade 5 and $20,100 for grades 6-8. Inflated at 4% a year and paid from income, as today. |
| Grades and progression | Henry is in 5th at Ashbrook and stays there through grade 12, finishing in 2033-34. Clara is in 1st at Meridian Day, continues there through grade 8, and moves to an upper school for grades 9-12 from 2034-35. Private school runs to 2037. |
| Upper school cost | Not yet decided, so it is a control above rather than a fixed figure. The default of $28,500 is Colton Hall's 2026-27 upper division rate, used as a deliberate ceiling. Ashbrook's grades 6-12 rate of $20,200 with fees sits at the other end of the range. |
| In-state college | $30,000 a year in today's dollars, the resident cost of attendance at the family's flagship state university, including tuition, fees, housing, food and books. |
| Private college | $65,500 a year in today's dollars, the national average total budget at a private nonprofit four-year institution. |
| College start years | Henry 2034 and Clara 2038, four years each. Clara is a year later than her age alone suggests because her September birthday misses the state's September 1 kindergarten cutoff, so she started school a year behind. |
| Where the money comes from | The 2026 lump is transferred from the trust taxable account, which is already invested. Gains realized on the way are absorbed by roughly $180,000 of capital loss carryforwards. The annual amount is drawn from the checking cushion and moved into the trust account. |
| State 529 deduction | $20,000 a year on a joint return with a five year carryforward, modelled explicitly. From 2031 the deduction is refilled by running private school tuition through the 529, which the family's state of residence treats as a qualified, tax free withdrawal. Rate applied is 5%. No federal deduction exists. |
| Gift tax | Not a constraint under the recommended plan, since pass-through contributions of $20,000 a year sit well inside the $76,000 joint exclusion across two children. It only becomes relevant if a large lump is held in the 529. |
| Tax drag | None applied to either account. The 529 is genuinely tax free; the trust account is sheltered only while the loss carryforwards last, so later years are modestly optimistic. |
| Not modelled | Scholarships, financial aid, student earnings, and the $1,000 federal seed contribution, for which neither child qualifies. |
Two accounts do the work: the 529, which the money only passes through, and the trust account, which holds it. Nothing here depends on new income, and the school bills continue to be paid the way they are paid today.
Savings and the checking reserve are deliberately left out of the balances below. They are sources, not part of the plan, and neither is spent on education. Read the first block as a round trip: the same $20,000 goes in and comes straight back out, which is why the 529 ends every year at nil while still earning a full deduction. The tuition total is unchanged, and so is what leaves the checking account. Balances are year end and assume the return set above. The checking floor of $100,000 is a deliberate reserve, roughly six months of core living costs alongside savings. Only one of these moves changes what is available to spend on college: the cash draw. Earmarking part of the trust account decides how much of what you already hold is committed, and routing money into the 529 changes only the wrapper.
This is the part worth dwelling on. Capturing the full state deduction every year requires no new saving and no money left sitting in a 529.
Deposit $20,000 into the 529. Claim the deduction. Withdraw the same $20,000 and pay the school with it. K-12 tuition is a qualified, tax free withdrawal in their state, and recapture only applies to non-qualified withdrawals or rollovers taken within a year.
The balance ends the year where it started. About $1,000 stays in your pocket.
The federal K-12 cap is $20,000 per child per year as of January 2026. With two children in private school there is more qualifying tuition than the $20,000 state deduction can absorb.
It runs every year from 2026 until Clara finishes school in 2037. Twelve years at $1,000 is roughly $12,000.
A large 2026 contribution was the earlier plan, and it turns out to add nothing. Its carryforward would simply fill deduction years that tuition fills for free, so the tax result is identical either way.
Which means no gift tax election, no five year commitment, and nothing locked to education that does not need to be.
The plan deliberately holds no balance in the 529. College money sits in the trust taxable account, which carries no purpose restriction, no penalty and no beneficiary. A child choosing a different path does not trigger a decision, a form, or a tax event. The money simply stays invested and becomes part of the family balance sheet.
The pass-through is unaffected too. It only ever moves tuition for a child actually enrolled in school, so it stops of its own accord.
These routes only matter if the optional 529 holding is used. At the recommended setting of zero, none of them apply.
The beneficiary can be changed to another child, a grandchild, or to Ryan or Kate, with no tax and no penalty. With two children four school years apart this is usually the first answer.
A lifetime maximum of $35,000 per beneficiary can move from a 529 into that person's Roth IRA. The account must have been open fifteen years, the child needs earned income, and it counts against their annual Roth limit. Worth noting that a pass-through account still satisfies the fifteen year test, so simply having the accounts open now preserves this option even at a nil balance.
Registered apprenticeships, trade and vocational schools, and up to $10,000 of student loan repayment all qualify.
A non-qualified withdrawal returns contributions tax free. Only the earnings are taxed as ordinary income plus a 10% penalty, and the state recaptures the deduction previously claimed on those contributions.
Private school already absorbs what the household earns above its living costs, so the college fund cannot be built out of income. It does not need to be. It is assembled from the balance sheet instead: the trust account already standing behind college, and a checking cushion holding roughly twice the reserve the household actually needs, earning interest taxed at your highest rate and doing no particular job.