| Feature |
Scholar'sEdge®
529 Plan |
Custodial Accounts
UGMA/UTMA |
Coverdell Education
Savings Accounts
(Formerly Education IRAs) |
| Control Over Assets |
Account Owner
Only the account owner may name beneficiaries and direct distributions. |
Minor at Age of Majority
Custodian must give up control when Minor reaches age of majority (varies by state). |
Donor |
| Maximum Contribution |
$294,0001 |
None |
$2000 per Year
$2000 per year per beneficiary under age 18 only; by individuals who meet Adjusted Gross Income (AGI) limits. |
| Taxation of Earnings |
Federally Tax Free
Earnings are federally tax free if used for qualified education expenses, including tuition, fees, room and board, books, and supplies. State tax treatment may vary.2 |
No Tax Deferral
Income and capital gains taxable to Minor (at parents' rate over certain limits for children under 14) unless income used to support Minor, then income taxable to person with obligation of support. |
Federally Tax Free
Distributions for qualified higher education expenses of designated beneficiary are free of federal income tax. State tax treatment may vary. |
| Adjusted Gross Income (AGI) Limit for Plan Contributions |
None |
None |
Limited
Phase-out of contributions:
Single Filers: $95,000-$110,000;
Joint Filers: $190,000-$220,000. |
| Estate/Gift Tax Guidelines |
Value Excluded from Account Owner's Estate
Individuals can contribute up to $12,000 annually ($24,000 for joint filers) per beneficiary or up to $60,000 ($120,000 for joint filers) once within a five-year period, without triggering gift taxes. Generally, gifts are excluded from the account owner's estate. |
Value Included in Minor's Estate
Individuals can gift up to $12,000 ($24,000 for joint filers) each year to Minor. Assets included in donor's estate if also custodian. |
Balance of Account Not Included in Estate
Gift counts against $12,000 ($24,000 for joint filers) per beneficiary annual gift tax exclusion. Generally, gifts are excluded from the account owner's estate. |
| Beneficiary Changes |
Change Any Time
Can change any time, without income tax ramifications, to any member of the initial beneficiary's family (as defined in IRC Section 529). Gift and Generation-Skipping Tax (GST) tax consequences only if the new beneficiary is a generation below the old beneficiary. |
N/A
Completed gift to minor. |
Change Any Time
Can transfer balance to beneficiary's family member under age 30 without income-tax ramifications. Gift and GST tax consequences only if the new beneficiary is a generation below the old beneficiary. |
Guidelines for Use
of Assets |
Qualified Expenses
Can be used for qualified higher education expenses, within limits, at any accredited post-secondary school in the U.S., including tuition, books, and room and board. |
Use for Minor
If used by the custodian before the Minor reaches the age of majority, use must be for the benefit of the Minor. No restrictions on Minor's use once age of majority is reached. |
Qualified Expenses
Use for qualified elementary, secondary, or higher education expenses by the time beneficiary reaches the age of 30. |
| Taxation/Penalty for Non-Qualified or Early Withdrawals |
Earnings Only
Earnings portion subject to a 10% federal tax penalty and taxed to distributee at ordinary income tax rates. |
N/A |
Earnings Only
Earnings portion only is taxed to distributee at ordinary rate and subject to a 10% penalty. |
