529 College Savings Plan

Selecting a 529 Plan – Anyone who wants to set aside funds for higher education expenses should consider a 529 plan. In choosing among 529 plans, one should consider that certain states offer tax incentives to in-state residents who invest in their home state’s 529 plan. Whether a state tax incentive is available depends on your state of residence. Money invested in a 529 college savings plan grows federal income tax free when withdrawn for qualified higher education expense and earnings are free from federal income tax.  For tax advice, consult with your tax professional. Our advisors can provide you with information concerning 529 plans, including comparisons of the performance of different state 529 plans.

Objective – To provide an account that individuals can use to save for qualified higher education expenses.

Product Features

  • Contribution – A 529 plan may allow for contributions over $300,000, depending on the plan. However, contributions are gifts; therefore, the $13,000 annual gift limit should be considered. In addition, a special gifting provision applies to 529 plans; $65,000* can be contributed in one year to be prorated over five years, until the maximum contribution limit of the plan is reached. Tax forms are required for accelerated gifting, please contact your tax professional.
  • Eligibility – Anyone who plans to attend an eligible postsecondary educational institution can be the beneficiary of a 529 plan. The account holder will maintain control of the account. If the beneficiary decides not to attend a postsecondary school, the account owner may change beneficiaries to another member of the family (first cousins included; if the new beneficiary is not related to the previous beneficiary, taxes may apply) of the original beneficiary.
  • Distributions – Qualified distributions can be taken without federal income tax or penalty for any of the following: tuition, fees, books, supplies, room and board, plus for 2009 and 2010, computers and equipment, technology and internet access. Withdrawals used for expenses other than qualified education expenditures may be subject to federal and state taxes plus a 10 percent penalty.
* If an account owner elects to treat a contribution as having been made over a five-year period and dies before the end of the five-year period, the portion of the contribution allocable to the remaining years in the five-year period (not including the year in which the account owner died) would be included in computing the account owner’s gross estate for federal estate tax purposes. Account owners may be required to file a gift tax return in each of the five years. In addition, account owners may wish to consult their tax or estate-planning counsel to ensure that they obtain the tax  consequences they desire.
For additional information on a particular 529 plan’s payment and compensation practices, please review the plan’s official statement.   Investors should carefully consider the investment objectives, risks, and  charges and expenses associated with 529 plans before investing. More information regarding 529 plans is available in the issuer’s offering materials.  Please read them carefully before investing.
There is no federal or state guarantee of investments in 529 plans, principal value may be lost, and investing in a plan does not guarantee admission to college or sufficient funds for college.  Investors should carefully consider plan investment goals, risks, charges and expenses before investing.  Investors should consider, prior to investing, whether their resident state or the resident state of the beneficiary offers any state tax or other benefits that are only available in that state’s qualified tuition program.