Morningstar Advisor - Fall 2008 - 11

Inbox The magazine of investing insights for independent-minded advisors Summer 2008 the Medicaid applicant made a gift to a 529 account within five years. The second is whether the account owner should be treated as owning the assets for Medicaid purposes regardless of when contributed. The states have different answers to this question. I was browsing the college-savings section of the Summer 2008 issue of Morningstar Advisor when I came across the map that displays the best and worst 529 plans of the continental United States and Alaska. Unfortunately, you “forgot” to include Hawaii, the 50th state. You must not know that Hawaii was admitted as a state in 1959 after being annexed by the United States as a territory in 1898. It’s a constant source of irritation with Hawaii residents because the oversight is quite common. And although it’s not rated very highly, we do have a 529 plan. M. Lum, Allstate, Honolulu, HI many desirable features that far outweigh the limited (but expanding) investment options. Hampton Scurlock III, Retirement Tax Advisory Group, Lexington, KY Editor’s note: On Sept. 2, the Kentucky plan gave its investors more flexibility by adding two more options. For an index-laden offering, however, the plan is still expensive. We’ll revisit Kentucky’s, as well as every other state’s, 529 plan next year when we release our new list of the best and worst 529 plans. The College Savings Landscape: Choices are plentiful, as are the challenges. E-mail your feedback, ideas, and viewpoints to magazine_editor@morningstar.com. Or write us at: Morningstar Advisor Magazine, 225 W. Wacker Dr., Chicago IL 60606. I live in North Carolina, and although it didn’t make your list, I think the state’s 529 plan is one of the worst. North Carolina finally allowed a tax deduction for contributors, but that hasn’t helped make up for the poor performance of the plan’s investments. Instead, I have been using American Funds’ CollegeAmerica 529 in neighboring Virginia. Its fees are low, and its investments are good. States should be more aligned to giving their residents better plans with lower fees and better performance. Merely giving a state tax deduction for investments isn’t enough. It also doesn’t make sense for states to be allowed to tax the proceeds if they’re used out of state. All proceeds used for education should be tax free. Keep up the good work in identifying whose 529 plans are good and bad. Maybe “bad” states like North Carolina will feel the pressure to make their plans fairer. Mary C. Scoggin, Scoggin Insurance & Financial Services, Pinehurst, NC Editor’s note: Our apologies for leaving one of College Savings and 529s I truly enjoy Morningstar Advisor. It is a great contribution from Morningstar to those advisors who are serious about the academic side of planning. I have a quick question regarding a comment on page 36 of the Summer 2008 issue. It states that a 529 plan may be tapped by Medicaid if the account owner needs nursing-home care and does not have other funds available. I’m under the impression that contributions would qualify for the “look-back” rule. Therefore, five years after the contributions, Medicaid wouldn’t be able to demand these assets. Is this correct? Paul Caspersen, Ames, IA the most beautiful states off our map. Although Hawaii’s 529 plan is improving (Vanguard and Upromise recently came on-board to manage and administer the fund), the state doesn’t offer its residents any state tax benefits for choosing it and slaps a 0.75% annual fee on assets. There are plenty of cheaper, better alternatives out there, including similar plans in Iowa and Missouri and cheaper and more flexible Vanguard options in Utah and Ohio. In the article “Best and Worst 529 CollegeSavings Plans,” I was surprised to see the direct-sold Kentucky Education Savings Plan Trust named to the dishonorable list. It offers a low investment minimum ($25); no setup, application, enrollment, and administrative fees; no investment commissions; and it has low total costs (0.8% or less). The article mentioned what seems to be the plan’s negative: the fact that there are few investment options. The plan, however, recently added two more options. It seems that the Kentucky plan is cost-efficient and has Susan T. Bart, an attorney who writes a monthly college-savings column for MorningstarAdvisor.com, responds: There are two issues. One is the application of the look-back rule, which should apply whenever MorningstarAdvisor.com 11
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Morningstar Advisor - Fall 2008

Table of Contents for the Digital Edition of Morningstar Advisor - Fall 2008

Morningstar Advisor - Fall 2008
Contents
New on MorningstarAdvisor.com
Letter from the Editor
Contributors
Inbox
Are You Preparing for Higher Taxes?
State of Financials
Oracles of Alabama
Investment Briefs
Managers’ Investment Secrets Revealed
Conformity Becomes a Growing Concern at American
Gimme Shelter
Location, Location, Location
Rooted in Buffett, Going for Growth
Keeping Little Company
Away from the Numbers
Consumer Confidence
What about Natural Gas?
TIPS to Beat Back Inflation
Investing in Hidden Assets
Funds That Have an Edge Come Tax Time
Mutual Fund Analyst Picks
50 Most Popular Equity ETFs
Undervalued Stocks
Most Popular Variable Annuities
New at Morningstar
One for You, 19 for Me
Morningstar Advisor - Fall 2008 - Intro
Morningstar Advisor - Fall 2008 - Morningstar Advisor - Fall 2008
Morningstar Advisor - Fall 2008 - Cover2
Morningstar Advisor - Fall 2008 - 1
Morningstar Advisor - Fall 2008 - 2
Morningstar Advisor - Fall 2008 - Contents
Morningstar Advisor - Fall 2008 - 4
Morningstar Advisor - Fall 2008 - 5
Morningstar Advisor - Fall 2008 - New on MorningstarAdvisor.com
Morningstar Advisor - Fall 2008 - 7
Morningstar Advisor - Fall 2008 - 8
Morningstar Advisor - Fall 2008 - Letter from the Editor
Morningstar Advisor - Fall 2008 - Contributors
Morningstar Advisor - Fall 2008 - Inbox
Morningstar Advisor - Fall 2008 - Are You Preparing for Higher Taxes?
Morningstar Advisor - Fall 2008 - 13
Morningstar Advisor - Fall 2008 - State of Financials
Morningstar Advisor - Fall 2008 - 15
Morningstar Advisor - Fall 2008 - 16
Morningstar Advisor - Fall 2008 - Oracles of Alabama
Morningstar Advisor - Fall 2008 - 18
Morningstar Advisor - Fall 2008 - 19
Morningstar Advisor - Fall 2008 - 20
Morningstar Advisor - Fall 2008 - Investment Briefs
Morningstar Advisor - Fall 2008 - 22
Morningstar Advisor - Fall 2008 - 23
Morningstar Advisor - Fall 2008 - 24
Morningstar Advisor - Fall 2008 - 25
Morningstar Advisor - Fall 2008 - Managers’ Investment Secrets Revealed
Morningstar Advisor - Fall 2008 - 27
Morningstar Advisor - Fall 2008 - 28
Morningstar Advisor - Fall 2008 - 29
Morningstar Advisor - Fall 2008 - Conformity Becomes a Growing Concern at American
Morningstar Advisor - Fall 2008 - 31
Morningstar Advisor - Fall 2008 - 32
Morningstar Advisor - Fall 2008 - 33
Morningstar Advisor - Fall 2008 - 34
Morningstar Advisor - Fall 2008 - 35
Morningstar Advisor - Fall 2008 - Gimme Shelter
Morningstar Advisor - Fall 2008 - 37
Morningstar Advisor - Fall 2008 - 38
Morningstar Advisor - Fall 2008 - 39
Morningstar Advisor - Fall 2008 - Location, Location, Location
Morningstar Advisor - Fall 2008 - 41
Morningstar Advisor - Fall 2008 - 42
Morningstar Advisor - Fall 2008 - 43
Morningstar Advisor - Fall 2008 - 44
Morningstar Advisor - Fall 2008 - Rooted in Buffett, Going for Growth
Morningstar Advisor - Fall 2008 - 46
Morningstar Advisor - Fall 2008 - 47
Morningstar Advisor - Fall 2008 - 48
Morningstar Advisor - Fall 2008 - 49
Morningstar Advisor - Fall 2008 - 50
Morningstar Advisor - Fall 2008 - 51
Morningstar Advisor - Fall 2008 - 52
Morningstar Advisor - Fall 2008 - 53
Morningstar Advisor - Fall 2008 - Keeping Little Company
Morningstar Advisor - Fall 2008 - 55
Morningstar Advisor - Fall 2008 - 56
Morningstar Advisor - Fall 2008 - 57
Morningstar Advisor - Fall 2008 - Away from the Numbers
Morningstar Advisor - Fall 2008 - 59
Morningstar Advisor - Fall 2008 - 60
Morningstar Advisor - Fall 2008 - 61
Morningstar Advisor - Fall 2008 - Consumer Confidence
Morningstar Advisor - Fall 2008 - 63
Morningstar Advisor - Fall 2008 - 64
Morningstar Advisor - Fall 2008 - 65
Morningstar Advisor - Fall 2008 - 66
Morningstar Advisor - Fall 2008 - 67
Morningstar Advisor - Fall 2008 - 68
Morningstar Advisor - Fall 2008 - What about Natural Gas?
Morningstar Advisor - Fall 2008 - 70
Morningstar Advisor - Fall 2008 - 71
Morningstar Advisor - Fall 2008 - 72
Morningstar Advisor - Fall 2008 - TIPS to Beat Back Inflation
Morningstar Advisor - Fall 2008 - 74
Morningstar Advisor - Fall 2008 - 75
Morningstar Advisor - Fall 2008 - Investing in Hidden Assets
Morningstar Advisor - Fall 2008 - 77
Morningstar Advisor - Fall 2008 - Funds That Have an Edge Come Tax Time
Morningstar Advisor - Fall 2008 - 79
Morningstar Advisor - Fall 2008 - 80
Morningstar Advisor - Fall 2008 - 81
Morningstar Advisor - Fall 2008 - Mutual Fund Analyst Picks
Morningstar Advisor - Fall 2008 - 83
Morningstar Advisor - Fall 2008 - 84
Morningstar Advisor - Fall 2008 - 85
Morningstar Advisor - Fall 2008 - 50 Most Popular Equity ETFs
Morningstar Advisor - Fall 2008 - 87
Morningstar Advisor - Fall 2008 - Undervalued Stocks
Morningstar Advisor - Fall 2008 - 89
Morningstar Advisor - Fall 2008 - 90
Morningstar Advisor - Fall 2008 - 91
Morningstar Advisor - Fall 2008 - Most Popular Variable Annuities
Morningstar Advisor - Fall 2008 - 93
Morningstar Advisor - Fall 2008 - 94
Morningstar Advisor - Fall 2008 - New at Morningstar
Morningstar Advisor - Fall 2008 - One for You, 19 for Me
Morningstar Advisor - Fall 2008 - Cover3
Morningstar Advisor - Fall 2008 - Cover4
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