Education Savings

Education Savings Plans Compared

The differences between the different education savings plans are significant. Deciding on a plan involves many factors specific to your situation. It is encouraged to seek professional advice for this decision.

	Advantages	Possible Limitations
"529" Prepaid Tuition Plan1	Account owner retains control of assets Earnings grow tax deferred Qualified withdrawals free of federal taxes2 Estate and federal gift tax benefits High contribution limits No income or age restrictions Can be used for broad range of higher education costs Flexible beneficiary designation Portability - may transfer assets to a different 529 plan In State plans may have a State tax advantage.	Investment options potentially limited to the funds made available Nonqualified withdrawals are subject to ordinary federal and any applicable state income tax, an additional 10% federal tax Assets may only be reallocated once per calendar year or upon a change in beneficiary
Coverdell Education Savings Account	Qualified withdrawals free of federal taxes Flexible beneficiary designation Can be applied to elementary, secondary, and higher education expenses Money can be gifted to child who can open own account, bypassing income restrictions Investment flexibility	Income restrictions Considered student assets $2,000 annual contribution limit 10% tax penalty on nonqualified withdrawals Age restriction Contributions for students 18 or older are not allowed except for special needs students Withdrawals must be made by students 30th birthday and/or certain penalties may apply (except for special needs students)
UGMA/UTMA Account	Portion of earnings taxable at student's rate No limit on amount transferred to account Parents control assets until child reaches legal age Investment flexibility Unrestricted use of assets, provided it is for the benefit of a minor	Considered student assets Adult loses control of assets when child reaches legal age Annual transfers in excess of $12,000 subject to gift tax Irrevocable gift and may not be transferred to anyone else No tax deferral on earnings

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1 These plans are sold by Offering Statement. Carefully consider the investment objectives, risks, charges and expenses of a fund before investing. This and other information is contained in an Offering Statement available from the company. Read the Offering Stattement carefully before investing.
1 Nonqualified withdrawals are subject to ordinary federal and any applicable state income tax, an additional 10% federal tax

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