|
| |
HOW TO SELECT
A STATE SECTION 529 PLAN
 | While Section 529 lays down the basic rules for what
all qualified plans must provide, within those parameters the states are
allowed a wide degree of latitude in fashioning their particular programs. |
| Different states are introducing their Section 529 Plans so frequently, and
once started are changing them so often, that the best way to obtain up-to-date
and generally reliable information on the features of each state’s Section 529
Plans is to start by going to the web-site Savingforcollege.com, http://www.savingforcollege.com
. |
| Apart from learning the details of each state’s
plans, it would also be helpful to know what features for a particular family
may be more important than others. The following is a list of the criteria
that a family or its advisors should consider when evaluating whether to use a
particular state’s Prepaid Tuition Plan or Education Savings Plan, or to go
with the Independent Prepaid Tuition Plan. |
FACTORS APPLICABLE TO BOTH TYPES OF PLANS
| Residency requirement for owner and/or beneficiary
|
| Age limitation on beneficiaries |
| Minimum and maximum contribution limits |
| Fees charged for setting up the account, and any on-going expenses |
| Educational expenses covered (i.e., only tuition and fees, or room and
board, books, supplies, and others) |
| Limitations on changing beneficiaries or transferring ownership, and the
fees for processing such change |
| Rollover limitations if the owner wants to
transfer the account to another state |
| Steps necessary to obtain a refund
|
| Any penalties on non-qualified distributions or refund |
| Minimum period following a contribution before funds can be withdrawn
|
FACTORS PERTAINING TO EDUCATION SAVINGS PLANS
| Identity of investment manager(s) and their track record |
| Types of investment options available |
| Whether an account must be established through a broker (more expensive) or
whether an individual can set up an account directly |
| How are non-residents treated as compared to residents |
| Restrictions or charges if an owner wants to change the investment mix
within the same state plan |
| Specifics of how an aged-based or years-to-enrollment investment strategy
works |
| Fees and expenses charged by the manager |
| Expense ratio for the each of the mutual funds offered |
FACTORS PERTAINING TO STATE-SPONSORED PREPAID TUITION PLANS
| Whether the state guarantees the rate of return and principal with the full
faith and credit of the state |
| Limits on education institutions where the credits can be used (e.g., only
in-state public institutions, any in-state institution, or any federally
qualified institution, regardless of its location.) |
| How credits will be applied to out-of-state schools
|
|
DISCLAIMER
Martin J. Hagan is licensed to practice law in the
Commonwealth of Pennsylvania. This website is intended solely for
informational use and is not intended to solicit clients. Likewise, any
information contained in or obtained from this web site is for informational
purposes only and is not intended to be used as legal advice.
IRS CIRCULAR 230 DISCLAIMER :
Pursuant to Treasury guidelines, any tax advice contained in this website
(or any link from it) does not constitute a formal opinion. Accordingly, any tax
advice contained in this website (or any link from it) is not intended or
written to be used, and cannot be used by any taxpayer, for the purpose of
avoiding penalties that may be asserted by the Internal Revenue Service. You should seek advice
based on your particular circumstances from an independent tax advisor.
Send mail to mhagan@haganlaw.net with
questions or comments about this web site.
Copyright © 2008 Martin J. Hagan, One Gateway Center - 8 South; Pittsburgh, PA 15222-1435
Last Updated:
05/28/08
|
|
