Any earnings grow tax-deferred and qualified distributions are federal income tax-free.
Part of investment earnings may be tax-exempt
High annual exclusion transfer tax limits.
Up to $60K per Beneficiary in a single year ($120K per married couple)
Standard $12K annual ($24K per couple)
$2,000 annual account contribution limit
Beneficiary can be changed
Parent (account owner) maintains control over distribution of assets.
Contributions not limited by the income of the parent (account holder).
No age limit for beneficiary (child).
Low impact on financial aid.
Choice of investments
A choice of Portfolios managed by professional fund manager
Owner (Custodian) researches and chooses investments
Owner researches and chooses investments
Controls
Revocable Gift
Irrevocable Gift
Irrevocable Gift
Parent (participant) controls the account; child is beneficiary
Custodian controls the investment until s/he transfers the account to the former minor
Parent (account owner) controls the account; child is beneficiary
Can transfer account at any time to benefit another member of original designated beneficiary's family
Cannot be transferred to another child (beneficiary)
Parent (owner) may transfer account to another family member (beneficiary)
May only be used for college related expenses including tuition, books, etc.
Assets must be used for the benefit of the child, but can include non-college expenses
May only be used for education (college or K-12) expenses
Can withdraw up to the amount of an awarded scholarship without incurring federal penalty tax.
Withdrawals can be made at any time
Can only withdraw money for the benefit of the child non-education uses will incur a penalty
Can withdraw money anytime. Any earnings on nonqualified distributions will be
subject to federal income taxes at the distributee's rate as well as a 10%
federal penalty tax.
Financial Aid
Account is considered asset of the parent (participant), not child (beneficiary)
Account is considered asset of the child (minor)
Account is considered asset of the parent (account owner), not child (beneficiary)
Lower weighting in financial aid eligibility formulas
Higher weighting in financial aid eligibility formulas
Lower weighting in financial aid eligibility formulas
