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Can be used for qualified higher education expenses at any accredited post-secondary institution in the U.S.
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If used by the custodian before the Minor reaches the age of majority, use must be for benefit of the Minor. No restrictions on Minor's use once age of majority reached.
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Must be used for qualified elementary, secondary or higher education expenses by the time beneficiary reaches the age of 30.
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Up to $251,000 per beneficiary, adjusted annually.1
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Beginning in 2002, $2,000 per year per beneficiary under age 18; by individuals who meet AGI limits.
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Can change anytime, without income tax ramifications, to any member of initial beneficiary's family (as defined in IRC Section 529). Gift tax consequences unless new beneficiary is member of the old beneficiary's family and same generational level.
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Completed gift to a Minor.
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Can transfer balance to Education IRA of beneficiary's family member without income tax ramifications. Gift tax consequences unless new beneficiary is member of old beneficiary's family and same generational level.
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Account owner may name beneficiaries and direct distributions; investment is limited to investment options in the plan, and can only be changed once per calendar year.
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Custodian must give up control when Minor reaches age 18 (some states may provide for a different age).
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Phase out of contributions:
Single Filers: $95,000 - $110,000;
Joint Filers: $190,000 - $220,000 (in 2002)
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Earnings are federal tax-free if used for qualified higher education expenses.2 State tax consequences may vary.3
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Income and capital gains taxable to Minor (at parent's rate over certain limits for children under 14) unless income used to support Minor, then income taxable to person with obligation of support.
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Distributions for qualified higher education expenses of designated beneficiary are free of federal income tax. State tax consequences may vary.
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Earnings taxed at both federal and state levels in year realized.
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Individuals can contribute up to $55,000 ($110,000 if married and filing jointly) per beneficiary, once within a 5-year period without triggering gift taxes.4 Generally, donor does not include account in estate.
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Individuals can gift up to $11,000 ($22,000 if married and filing jointly) each year to Minor. Assets included in donor's estate if donor is also current custodian and dies while the child is a minor.
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Gift counts against $11,000 ($22,000 if married and filing jointly) per beneficiary annual gift tax exclusion. Donor does not include account in estate.
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Account assets part of owner's estate.
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Earnings subject to income taxes at the distributee's tax rate plus a 10% federal income tax penalty.
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Earnings portion only is taxed to distributee at ordinary rate and subject to 10% penalty.
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