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Investments and Control
Features 529 Plans UGMA/UTMA Coverdell Education Savings Taxable Account In Parent’s Name
Qualifications For Use Qualified expenses at eligible institution providing post high school instruction. Includes vocational, technical, community college, plus two and four-year colleges. Owner must use for benefit of minor, if used before minor reaches legal age; after child becomes of legal age, no restriction on use of assets. Qualified expenses for K-12 plus any postsecondary school; must be used before beneficiary turns 30 (Age requirement not applicable for special needs beneficiary.) None
Who Is Owner Account owner Student Student Account owner
Who Controls Account owner Control transfers to child when child becomes of legal age. Account owner Account owner
Investment Options Defined by each state’s plan. Broad range of securities and other investments. Broad range of securities and other investments. Broad range of securities and other investments.
Investment Style Professionally managed; changes are limited. Can be self directed; changes are not limited. Can be self directed; changes are not limited. Can be self directed
Change Beneficiary Yes, may change anytime to a member of family of original beneficiary without penalty No Yes, may change anytime. Not applicable
Max Contribution Established by each state. Max. ranges from $235,000 to $341,000. Lifetime limit adjusted periodically for inflation. Unlimited $2k annually beginning 2002 Unlimited
Financial Aid and Taxation
Features 529 Plans UGMA/UTMA Coverdell Education Savings Taxable Account In Parent’s Name
Tax Earnings Federal tax-free. State tax advantages may vary by state. Up to $1,500 is generally tax-free for Federal and state tax purposes. Remaining income may be taxed at parents’ rate. Federal tax-free. State tax advantages may vary by state. Taxable to owner
Federal Tax Deduction No No No No
State Tax Deduction Yes, for some states. No No No
Withdrawl Penalty Earnings are subject to 10% penalty if not used for qualified expenses. Not applicable Earnings are subject to 10% penalty if not used for qualified expenses. Not applicable
Income Limitations None None Max allowed contributions phased out as AGI exceeds thresholds.(Single $95k-$110k, Joint $190K-$220K). None
Gift Tax Guidelines January 1, 2007 - gift limit of $60k per beneficiary ($120k with gift splitting) can be contributed without incurring gift tax. January 1, 2007 - subject to normal gift tax exclusion of $12k per beneficiary, per year ($24k with gift splitting). January 1, 2007 - subject to normal gift tax exclusion of $12k per beneficiary, per year ($24k with gift splitting). Assets part of owner’s estate.
Estate Tax Guidelines Account balance is generally not included in the estate of the contributor or the estate of the minor. (A portion can be included if the contributor dies in the 5-year averaging period.) Value included in minor’s estate. Balance of account not included in estate. Usually, neither contributor nor beneficiary includes account in estate. Assets part of owner’s estate.
Tax Year Current for tax year 2007 Current for tax year 2007 Current for tax year 2007 Current for tax year 2007



 

 
 

 

 
 
   
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