A state-sponsored, tax-advantaged investment program designed to help finance education expenses. There are two types of 529 plans: prepaid tuition plans and college savings plans. Tax advantages, investment options, restrictions, and fees can vary a great deal from one plan to another.
529 Prepaid Tuition Plans
Also known as Prepaid Education Arrangements (PEAs), 529 prepaid tuition plans allow families to buy all or part of a public in-state education at present-day prices. The value of the investment is guaranteed by the state to meet or exceed annual in-state public college tuition inflation. Plan costs can vary, depending on how close the student is to college.
The individual or entity establishing an Account or any successor to such individual or entity. References in this document to “you” mean you in your capacity as the Account Owner.
An Account Owner may be a United States citizen or permanent resident alien 18 years or older who has a valid Social Security number; a corporation, partnership or trust; a state or local government, or tax-exempt organization described in Section 501(c)(3) of the Internal Revenue Code; or a custodian under a UGMA/ UTMA account.
The account application is completed and submitted with payment to participate in a plan. It incorporates by reference the plan’s Plan Description and Savings Trust Agreement.
A charge for expenses incurred in the administration of a 529 college savings plan, which may include services such as recordkeeping, auditing, and preparing and printing statements and reports. This fee is deducted from your holdings based on a percentage of your assets in the plan. You can find a description of the fees and expenses charged by a plan in the Plan Description and Savings Trust Agreement.
Age-Based Portfolios aim to make investment decisions easier by placing you in a portfolio based on the beneficiary’s age. Portfolios for younger children will invest more heavily in equities, while older children’s portfolios will tend to include more fixed income and money market investments.
Automatic Investment Plan (AIP)
Automatic Investment Plan allows you to contribute a fixed amount of money in regular intervals. Funds are automatically deducted from your checking or savings account.
Annual Rate of Return
The rate of return on your investment, expressed as a percentage of the total amount invested.
A strategy for maximizing gains while minimizing risks in your investment portfolio. Asset allocation involves dividing your assets on a percentage basis among different broad categories of investments, including equity, fixed income, and money market.
The individual designated by the Account Owner to use the savings for qualified higher education expenses. Anyone with a valid Social Security number can be a beneficiary, including the account owner. You can open up more than one account for the same beneficiary, but you cannot have more than one beneficiary on the same account.
A government entity or 501(c)(3) not-for-profit organization can establish an Account to fund scholarship programs without designating a Beneficiary at the time the Account is established.
The Internal Revenue Code of 1986, as amended.
Coverdell Education Savings Account (Coverdell ESA, Coverdell Account or Education Savings Account)
A trust or custodial account with a Coverdell ESA designation that is created in the United States solely for paying qualified education expenses for designated beneficiaries under the age of 18 or special needs beneficiaries only if the written instrument creating the trust meets certain requirements. See Types of Investments for more details.
An account that is created for the benefit of a minor, with an adult (agent, bank, trust company, or other organization) serving as the custodian in accordance with applicable state law. The adult controls the funds until the child reaches the age of majority, at which point the account transfers into the child’s name.