College Savings Options

Southwest Investment Advisors

Optimistic Investing

Submitted by Southwest Investment Advisors on February 16th, 2018

YEAR 2019 RULES	529 Plan	Coverdell Education Savings Accounts	UGMA/UTMA
Federal Income Tax	Non-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expenses	Non-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expenses and qualified K-12 expenses also excluded	Earnings and gains taxed to minor; first $1,050 of unearned income is tax exempt; unearned income over $2,100 for certain children under age 24 is taxed at rates for estates and trusts
Federal Gift Tax Treatment	Contributions treated as completed gifts; apply $15,000 annual exclusion, or up to $75,000 with 5-year election	Contributions treated as completed gifts; apply $15,000 annual exclusion	Transfers treated as completed gift; apply $15,000 annual gift exclusion
Federal Estate Tax Treatment	Value removed from donor’s gross estate; partial inclusion for death during a 5-year election period	Value removed from donor’s gross estate	Value removed from donor’s gross estate unless donor remains as custodian
Maximum Investment	Established by the program; many in excess of $300,000 per beneficiary	$2,000 per beneficiary per year combined from all sources	No limit
Qualified Expenses	Tuition, fees, books, computers and related equipment, supplies, special needs and some room and board at eligible colleges and universities; up to $10,000 in tuition expenses at private, public and religious K-12 schools	Tuition, fees, books, supplies, equipment, special needs; room and board for minimum half-time students; additional categories of K-12 expenses	No restrictions
Able to Change Beneficiary	Yes, to another member of the beneficiary’s family	Yes, to another member of the beneficiary’s family	No; represents an irrevocable gift to the child
Time/Age Restrictions	None unless imposed by the program	Contributions before beneficiary reaches age 18; use of account by age 30	Custodianship terminates when minor reaches age established under state law (generally 18 or 21)
Income Restrictions	None	Ability to contribute phases out for incomes between $190,000 and $220,000 (joint filers) or $95,000 and $110,000 (single)	None
Federal Financial Aid	Counted as asset of parent if owner is parent or dependent student	Counted as asset of parent if owner is parent or dependent student	Counted as student’s asset
Investments	Menu of investment strategies as developed by the program	Broad range of securities and certain other investments	As permitted under state laws
Use for Nonqualifying Expenses	Withdrawn earnings subject to federal tax and 10% penalty	Withdrawn earnings subject to federal tax and 10% penalty	Funds must be used for benefit of the minor

From Savingforcollege.com

To determine which investments may be appropriate for you, consult with your financial professional.

Neither Southwest Investment Advisors nor LPL provide tax advice.

An investor should carefully consider the investment objectives, risks, charges and expenses associated with 529 plans before investing. More information is available in the issuer’s official statement which can be obtained from your financial professional. The official statement should be read carefully before investing.

Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents and taxpayers. The investments inside a 529 plan may fluctuate with changes in market conditions. When redeemed shares may be worth more or less than their original value. Nonqualified withdrawals do not enjoy tax-favored treatment. The earnings part of a nonqualified withdrawal will be subject to federal income tax, and the tax will typically be assessed at the account owner’s rate, not at the beneficiary’s rate. Plus, the earnings part of a nonqualified withdrawal will be subject to a 10 percent federal penalty, and possibly a state penalty too.

This report is prepared for general circulation and is for informational purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or service. Market prices and other data may be obtained from outside sources and is not warranted as to completeness or accuracy.