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.
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Coverdell Education Savings Account (ESA) from Wells Fargo Bank
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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
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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
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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
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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
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Eligibility Restrictions
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- Single with modified adjusted gross income less than $95,000 (annual contribution reduced if contributor’s income is between $95,000 and $110,000)
- Joint with modified adjusted gross income less than $190,000 (annual contribution is reduced if contributor’s income is between $190,000 and $220,000)
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None
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None
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Contribution age limits
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Age 18, must be used by beneficiary by age 30
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No age limit
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Generally up to age of majority (18 - 21) for your state
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Maximum yearly contribution per student
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- $2,000 a year per student until age 18; exception for children with special needs
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- $14,000 per year per student per contributor (max $28,000 per couple)
- OR as much as $70,000 ($140,000 per couple) in the first year of a 5-year period without exceeding the annual federal gift tax exclusion
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No limit, up to $14,000 can be treated as a gift for gift-tax purposes
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Taxation of earnings and withdrawals
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- 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
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- Earnings in the account grow tax-advantaged for future higher 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
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Earnings are taxable, typically at the minor’s tax rate. ”Kiddie tax” rules apply.
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Qualified withdrawals
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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)
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Higher education expenses including tuition, fees, books, supplies, and room and board
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Any purpose
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Penalties for non-qualified withdrawals
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- Earnings subject to ordinary income tax
- 10% IRS penalty on earnings; limited exceptions may apply
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- Earnings subject to ordinary income tax
- Subject to federal and state income tax and a 10% penalty
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N/A |
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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.
An Education Savings Accounts may rollover funds into another Education Savings Account for the benefit of the same designated beneficiary or a qualified member of the beneficiary's family who is under the age of 30. Maximum account balance per student varies by state sponsoring the plan. Please refer to the plan for specific information. College savings plans offered by each state differ significantly in features and benefits. The optimal plan for each investor depends on his or her individual objectives and circumstances. In comparing plans, each investor should consider each plan's investment options, fees and state tax implication.
A Special Needs Education Savings Account may continue to receive contributions after the student beneficiary attains age 18.
Subject to recapture if client dies within the five year period. No more gifts may be made during the five year period.
State plans may have specific rules regarding qualified higher education expenses.
Investment and Insurance Products: - Are Not insured by the FDIC or any other federal government agency
- Are Not deposits of or guaranteed by a Bank
- May Lose Value
ESA provisions that were set to expire at the end of 2012 have been extended by the American Taxpayer Relief Act of 2012.
Financial Advisors are registered representatives of Wells Fargo Advisors. Discussions with Financial Advisors may lead to a referral to Wells Fargo Advisors’ affiliates including Wells Fargo Bank, N.A. Wells Fargo Advisors and its associates may receive a financial or other benefit for this referral.
529 Plans and Custodial Accounts are available through Wells Fargo Advisors.
For more information about 529 College Savings Plans sold through Wells Fargo Advisors, please request the Program Description from your Financial Advisor.
Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.
Deposit products offered by Wells Fargo Bank, N.A. Member FDIC.
Wells Fargo Bank, N.A. is a banking affiliate of Wells Fargo & Company.
This material has been prepared for informational purposes only and is not a solicitation, or an offer to buy any security or instrument of to participate in any trading strategy. The accuracy and completeness of this information is not guaranteed and is subject to change. It is based on current tax information and legislation as of January 2013. Also, since Wells Fargo Advisors and its affiliates do not provide tax or legal advice, individuals should consult with their own tax and legal advisors before taking any action that may have tax or legal consequences.
