Compare College Saving Options 

 

 

 

529 Plans were created as a complement to prepaid tuition plans established by many states. Unlike prepaid tuition plans, there are generally no residency requirements.


529 savings plan monies can be used to pay for higher education costs at any accredited college, university or technical school in any state. This might be a college, graduate school, professional school, or a post-secondary vocational or trade school. The school may be either private or public; in-state or out-of-state.


This chart makes it easy to compare different savings vehicles side-by-side:

 

College Saving Profile
Comparison of College Savings Investment Options

 

529 Savings Plan

Coverdell Education Savings Account

UTMA/UGMA Account

Contribution Limit Depends on state—up to a maximum balance of $350,000 in the CollegeAccess 529 Plan $2,000 per student per year. Contributor must earn less than $110,000 (single filers) and $220,000 (joint filers) None
Age Limits None—however, some state plans do have their own age and/or time limits May contribute until child reaches age 18. Must spend assets by child’s 30th birthday May contribute until child reaches maturity, at which time child assumes control of assets
Tax Treatment of Withdrawals Tax-free if used for qualified expenses Tax-free if used for qualified expenses None (subject to annual tax)
Account Control Account owner Account owner Child assumes control once he or she reaches age of maturity
Beneficiary Flexibility Flexible. May be for the benefit of anyone, including yourself Flexible May not be changed
Effect on Financial Aid Considered to be assets of the account owner, so—unless the owner is also the beneficiary—only a small portion is considered in the aid calculation Considered to be assets of the account owner, so only a small portion is considered in the aid calculation Considered to be the assets of the student and reduces financial aid
Gift Tax Treatment May contribute $14,000 per year per child without gift tax May contribute $2,000 per year per child without gift tax May contribute $14,000 per year per child without gift tax
Estate Tax Treatment* Considered removed from donor’s estate Considered removed from donor’s estate

Considered removed from donor’s estate
State Tax Deduction Varies depending on the state None None



Chart data as of January 1, 2013.

*Assets placed into a 529 College Savings Plan are considered removed from the donor’s estate for tax purposes. An exception to this rule is if the Account Owner passes away and is listed as the Designated Beneficiary on the account. In this instance, the value of the account will be included in the account owner's taxable estate. You should consult a qualified tax advisor for any tax related issues involving your account.

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