College Savings Planning Service Overview
A child’s education is the key to their future. Whether your child has big aspirations and you want to contribute more or you want to lessen the burden on your child in the future, at Magellan Financial, we offer a variety of plans that can help fit both you and your child’s needs.
Need a comprehensive roadmap? Download our College Planning Worksheet to get started today!
College Savings Plans We Assist With:
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529 Plans
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UTMA Accounts
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Coverdell Education Savings Accounts (ESA)
529 Plans – Saving for Education
Building the assets you’ll need to fund a child’s or grandchild’s education is a challenge, but you may be able to meet it by contributing to a 529 plan.
What is a 529 Plan?
529 plans are one of the most popular ways of investing for a college or trade school education. They are flexible and low maintenance potential tax-deferred savings plans that anyone can qualify for. You can use your 529 plan account balances to fund any U.S. post-secondary education institution or certain schools abroad for expenses that are qualified.
What Costs Does a 529 Plan Cover?
The expenses that qualify include:
- Tuition
- Room and board
- Equipment
- Books
- Equipment
- Supplies (relevant to attendance or enrollment of your eligible school)
Whoever holds the account has control of the assets and is able to designate a new 529 plan beneficiary at any time with no penalties.
Interested in opening a 529 plan? Contact our team of Financial Advisors, and let’s get started today!
*Please consider the investment objectives, risks, charges and expenses carefully before investing in a 529 savings plan. The official statement, which contains this and other information, can be obtained by calling your financial advisor. Read it carefully before you invest.The availability of such tax or other benefits may be conditioned on meeting certain requirements. 529 Plans are subject to enrollment, maintenance, administrative and management fees and expenses. Non-qualified withdrawals are subject to federal and state income tax and a 10% penalty.
UTMA Accounts
What is a UTMA Account?
The Uniform Transfers to Minors Act (UTMA) are types of custodial accounts that are set up by an adult on behalf of a minor. They allow minors to own securities without requiring the services of an attorney to prepare trust documents or the court appointment of a trustee.
How Do I Transfer My UTMA Account to My Child?
When the beneficiary (child) reaches the age of legal majority (age 18 or 21 depending on the child’s state of residence), the assets will need to be transferred from the UTMA account into a brokerage account in the child’s name. This gives the child unfettered access to the funds.
If the account is sizable, the parents may want to establish a trust to direct age and distribution terms of the assets.
How are UTMAs Taxed?
The first $1000 is tax-free as it is offset by the standard deduction. The next $1000 is taxed at the child’s tax rate. Amounts greater than $2000 are taxed at the parent’s rate.
What Can UTMA Accounts Be Used For?
The assets in the accounts can be used for any purpose.
Coverdell Education Savings Accounts (ESA)
What is a Coverdell Educational Savings Account?
A Coverdell ESA is a trust or custodial account created only for the purpose of paying the education expenses of the designated beneficiary of the account. This account allows you to make an annual non-deductible contribution to a specially designated investment trust account.
Taxation of Earning & Withdrawals
Your account has the potential to grow free of federal income taxes and withdrawals from the account may be completely tax-free as well if used for qualified education expenses prior to age 30.
What Expenses Are Covered?
Qualified education expenses include:
- Tuition
- Room and Board
- Fees
- Books
- Equipment
- Supplies*
* At an eligible elementary, high school, and post-secondary school, as well as computer equipment for elementary and high school (restrictions apply)
Qualified Coverdell Education Savings Account distributions are not subject to state and local taxation in most states.
College Savings Plans By States
Each state offers savings plans that differ significantly in features and benefits. The optimal plan for each investor depends on his or her individual objectives and circumstances. In comparing plans, each investor should consider each plan’s investment options, fees, and state tax implications.
Ready to invest in your child’s education? Contact our team of Financial Advisors today!
Please note: This material has been prepared for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. The accuracy and completeness of this information are not guaranteed and is subject to change.
Wells Fargo Advisors Financial Network and its affiliates do not provide legal or tax advice. Transactions requiring tax consideration should be reviewed carefully with your accountant or tax advisor. Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.
