Q: Aware of the rising cost of college education, we purcahased a one-family house in Virginia, for rental investiment purposes. The monthly rent generally covers the mortgage, tax and insurance payments.

Our 13-year son will be reaching college age just about the time I retire. You can imagine that the lowered family income at that time will be a significant factor in our son's continued college education.

How can we best make our house available to our child when he needs it? The property is now in our name. Is it advisable to sign it over to him at this time?

Please advise us about the options available. How do we use real estate property to finance a college education rather than to give it to the government through taxes?

A: There are a number of possible alternatives for you to consider. It is strongly suggested that you check with your attorney and your accountant before you decide which course to take. Everyone has different situations, and general advice may not be appropriate to your case.

You can give the property to your son now. Presumably, you can avoid any gift tax since the gift would be valued at today's fair market value of the property, less the mortage balance. However, by giving this property to your son now, you lose your current income tax advantage which is available to you as the owner of rented property. Your son will probably not receive any income tax advantage since he doesn't have any income to offset his loss.

You can give your son the property when he reaches college age. This would preserve the tax benefits for you until your son goes to college, but might create a gift tax problem. As the years go by, the property will appreciate in value and your mortage will be reduced, thereby creating a larger gift.

You could also consider doing nothing now and refinance the property when your child reaches college age. Since property values are rising in the Washington metropolitan area, you should have sufficient equity in the property, which could be taken out by refinancing. The money you take out would be used for your son's education, and at time you will still have the property as an income-producing and tax benefit investment. There are no income tax consequences when you refinance, and there would be no gift tax consequences either.

Finally, you may want to consider selling the property when your son reaches college, on an installment sale basis. If you sell your house and receive 30 per cent or less of the selling price in the year the sale is made, your income tax liability would be spread out as you receive payments. You might consider selling the house and taking back some of the financing yourself, thereby giving you a yearly income, while at the same time deferring the tax bite.

However, the installment sale approach is highly complicated, and you could get burned unless you have competent advice.

Q: I am a resident of Montgomery County, and I rent out part of my house. I have collected security deposits from nmy tenants. Do I have to place such security deposits in a special account, or can I mix that money with my own funds?

A: As I read the Maryland law, if you have collected security deposits from your tenants, you must return those deposits within 45 days after the end of the tenancy, together with simple interest in the amount of at least 3 per cent per year.

Benny L. Kass, a Washington attorney, answers questions through this column. Write him in care of the Real Estate Section, The Washington Post, 1150 15th St. N.W., Washington 20071.