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Back to School About 529 Plans

| September 04, 2019
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Back to School about 529 Plans

Paying for college may be many years away if a child is young, or just around the corner. A 529 account may provide some strategic investment opportunities as an education savings plan.  Please be sure to read the plan prospectus for detailed information including fees, benefits and risks.

  • The 529 account can be opened regardless of the owner’s income.
  • The beneficiary is able to be changed at any time. For example, if a student graduates from college and did not use all the money or decided not to go to college, the money can be transferred to another beneficiary.
  • The investment grows tax-deferred. If used for qualifying expenses such as tuition or room and board at a qualifying institution, the distributions are federally tax-free. Please note that state-sponsored 529 plans may be free from state income tax but if you select a plan that is in another state, this benefit will not generally be available to you - consider the benefits of the plan carefully to see if certain features might outweigh the potential state tax benefit.
  • 529 plans may be used up to $10,000 per year toward elementary and secondary public and private and parochial school tuition and expenses without federal taxes. Be sure to find out about your state’s tax treatment.
  • Contributions may be made up to $15,000 per year or $30,000 from a married couple. Investors are able to accelerate 5 years of donations (example: $75,000 single or $150,000 married) without being subjected to gift tax limits. Contributions may be made until the account value reaches $500,000. Please note that states set their own contribution limit, with New York having the highest at $520,000. Accelerating contributions may be a potential strategy for estate planning that might be discussed with your financial advisor.
  • Depending on the plan sponsor, you may have access to model portfolios such as age-based portfolios or may be able to customize the investments therein.
  • 529 accounts owned by the parent of a beneficiary child are considered a parental asset for financial aid purposes on the FAFSA but typically only at a fraction of their value.


529 Plans often come up in conversation when the focus turns back to school. It’s important to learn more about them and a financial advisor may help.


This information is provided for general educational purposes only and not as specific advice for any individual. Seek professional advice before taking any action in regard to your finances.

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