529 Plans & Comparisons

 AdvantagesDisadvantages

Why a 529 College Savings Plan?

  • Qualified withdrawals free of federal taxes
  • Earnings grow tax deferred
  • Estate and federal gift tax benefits
  • High contribution limits
  • Can be used for broad range of college expenses
  • Flexible beneficiary designation
  • Account owner retains control of assets
  • No income restrictions
  • Contributions to certain instate 529 plans may be eligible for state tax benefits
  • Considered the account owner's assets for federal financial aid purposes
  • Nonqualified withdrawals are subject to ordinary income tax as well as an additional 10% federal tax
  • Assets may only be reallocated once per calendar year or upon a change of beneficiary to another member of the beneficiary’s family
  • State income tax treatment depends on state tax law

Coverdell Education Savings Account

  • Qualified withdrawals are free of federal taxes
  • Earnings grow tax deferred
  • 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 account owner's assets for federal financial aid purposes
  • $2,000 annual contribution limit per year
  • 10% federal 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 student’s 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
  • Investment flexibility
  • Unrestricted use of assets, provided it is for the benefit of the minor
  • Transfers in excess of $13,000 subject to gift tax
  • Considered student assets for financial aid purposes
  • Child receives assets upon reaching legal age of majority
  • Irrevocable gift and may not be transferred to anyone else
  • No tax deferral on earnings

 

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This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or for use to avoid penalties that may be imposed under U.S. federal tax laws. Contact your attorney or other advisor regarding your specific legal, investment or tax situation.

Federal and state tax laws and regulations are subject to change and may adversely affect your investment in a Section 529 plan. Investments in 529 college savings plans are neither FDIC insured nor guaranteed and may lose some value. Some states offer favorable tax treatment to their residents only if they invest in the state’s own plan. You should consult your tax advisor. Before investing in a plan, investors should carefully consider the investment objectives, risks, charges and expenses associated with municipal fund securities. Plan disclosure documents contain this and other information about a plan, and may be obtained by asking your financial advisor, on our website or by calling 1.800.CALL OPP (225.5677). Investors should read these documents carefully before investing.

Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.

Before investing in any of the Oppenheimer funds, investors should carefully consider a fund's investment objectives, risks, charges and expenses. Fund prospectuses and summary prospectuses contain this and other information about the funds, and may be obtained by asking your financial advisor, visiting oppenheimerfunds.com, or calling 1.800.CALL OPP (225.5677). Read prospectuses and summary prospectuses carefully before investing.

Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc.
225 Liberty Street, New York, NY 10281-1008