529 Plans, Educational Savings, Custodial Accounts - Wells Fargo

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Comparison - 529 College Savings Plan, Coverdell ESA, Custodial Accounts

Ready to select an account to save for education? Compare them below, or call one of our experienced investment professionals at 1-866-243-0931 for more assistance.

Coverdell Education Savings Account (ESA)

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529 Plan from Wells Fargo Advisors

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Custodial Account from Wells Fargo Advisors

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Account Description
Tax-deferred account with earnings and withdrawals free from federal income tax if used for qualified education expenses prior to age 30; contribution limits apply

A flexible tax-advantaged way to invest for education. 529 plans allow you to:

  • Invest for a loved one’s education or even for yourself
  • Make sizable contributions each year
  • Shift portions of an estate to future generations

A simple way to transfer property to a minor; called a Uniform Transfer to Minors (UTMA) or Uniform Gift to Minors (UGMA) depending in which state the minor resides
Income Eligibility Restrictions
  • Single contributor with modified adjusted gross income less than $95,000 (annual contribution reduced if contributor’s income is between $95,000 and $110,000)
  • Joint/married contributors with modified adjusted gross income less than $190,000 (annual contribution is reduced if contributors' income is between $190,000 and $220,000)

None
None
Beneficiary age limits
Age 18, must be used by beneficiary by age 30
No age limit
Generally up to age of majority (18 - 21) for your state
Maximum yearly contribution per student
  • $2,000 a year per student until age 18; exception for children with special needs
To avoid exceeding annual federal gift tax exclusion:
  • $15,000 per year per student per contributor ($30,000 per married couple who file jointly)
  • OR as much as $75,000 ($150,000 per married couple who file jointly) in the first year of a 5-year period

No limit, up to $15,000 can be treated as a gift for gift-tax purposes
Qualified withdrawals
Qualified education expenses including tuition, room and board, fees, books, equipment, and supplies at an eligible elementary, high school, and post-secondary school, as well as computer equipment for elementary and high school (restrictions apply)
  • Qualified expenses can include up to $10,000 in annual expenses for tuition in connection with enrollment or attendance at an elementary or secondary school. This may vary by state; consult your tax advisor state-specific information.
  • Qualified expenses for higher education can include books, supplies, and room and board in addition to tuition and fees.
Must be used for benefit of the minor. Subject to state law.
Penalties for non-qualified withdrawals
  • Earnings subject to ordinary income tax 
  • 10% IRS penalty on earnings; limited exceptions may apply

  • Earnings subject to ordinary income tax
  • 10% IRS penalty on earnings; limited exceptions may apply


N/A
Taxation of earnings and withdrawals
  • Contributions to the account have the potential to grow tax-advantaged for future education expenses
  • Earnings are generally free from federal income tax if used for qualified expenses before the student turns age 30 (exception for children with special needs )
  • Withdrawals are free from federal income tax if used for qualified expenses 
  • Earnings portion of distributions may be taxable in years the American Opportunity Credit or Lifetime Learning Credit is used if same expenses used to qualify for credit
  • Contributions to the account have the potential to grow tax-advantaged for future education expenses
  • Withdrawals are free from federal income tax if used for qualified expenses 
  • Earnings portion of distributions may be taxable in years the American Opportunity Credit or Lifetime Learning Credit is used if same expenses used to qualify for credit
  • State tax deductions and/or credits vary
  • Contributions may qualify for a state-income-tax deduction
  • The availability of such tax or other benefits may be conditioned on meeting certain requirements
 Earnings are taxable, typically at the minor’s tax rate. ”Kiddie tax” rules apply.
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Call one of our experienced investment professionals at 1-866-243-0931 to open an account.

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.