Smart planning and saving for education expenses

Saving to fund your children or grandchildren's education can be challenging, yet very rewarding. Designing an education savings plan to accumulate the right amount of assets at the right time is critical. Following the plan in a disciplined way, while adjusting it periodically to account for the rising cost of a college education, is also important.

529 College Savings Plans

With a 529 plan, all contributions are made post-tax for federal income tax purposes. Some states also offer tax-deductible contributions for residents1. The benefit to you is that your contribution will grow on a tax-deferred basis, and your distribution to pay for college can also be made tax-free.

Investors should be mindful that 529 College Savings Plans are municipal securities and may be subject to market volatility and fluctuation.

Another great benefit is that you, as the account owner, will have control over the funds. Many plans may even allow you to reclaim the funds for yourself if your needs change.

Evaluating education savings vehicles

Parents and grandparents can choose among a handful of investment programs, some of which offer tax advantages while saving for education expenses. In addition to 529 College Savings Plans, other plans are available and have been detailed in the comparison chart below. Speak with a Financial Professional2 from Royal Heritage Commercial Bank Securities (USA) Inc.:

Call info@royalheritagecommercial.com or call collect info@royalheritagecommercial.com

Mon - Fri (8am - 7:45pm ET)
Sat (9am - 3pm ET)

 

  529 College Savings Plans
 Coverdell Education Savings Accounts (ESAs)
 Custodial Accounts (UGMA/UTMA)
What's the core plan structure?
 Tax-advantaged investment account selected by owner with state-provided choices available
 Tax-advantaged investment account in which parents can choose to invest in mutual funds³, stocks⁵, bonds⁴ and more

 Irrevocable gift to a minor, managed by an adult custodian
What can the funds be used for?
 Qualifying college expenses
 Qualifying elementary, secondary, and college expenses
 Any purpose benefitting the minor
Who may open an account?
 Generally any adult, though details may vary by state
 Anyone whose modified adjusted gross income (MAGI) is less than $110,000 for single filers and $220,000 for married/joint filers 

Beneficiary must be under age 18 or is an individual with special needs
 Any adult
May friends and family contribute to the plan?
 Yes, in most cases
 Yes provided their MAGI does not exceed amounts noted above
 No
Maximum contributions
 Annually: $14,000-(individual) / $28,000 (joint) -or- lump sum: $70,000 (individual) / $140,000 (joint) in the first of a five year period
 $2,000 for all beneficiaries, regardless of how many separate Coverdell ESAs the beneficiary may have
 $14,000 a year w/o mandatory filing Form 709 & possible payment of gift taxes
Forms of acceptable funding
 Cash
 Cash
 Cash, securities, real estate, art, patents, royalties, and more
Tax implications - Contributions Federal: not deductible
State: varies by state
 Federal: not deductible
State: not deductible
 Federal: not deductible
State: not deductible
Tax implications-Earnings Tax-free when used for qualifying expenses
 Tax-free when used for qualifying expenses
 Taxed
Expiration age and transfer flexibility
 Funds may be disbursed for qualifying expenses for a beneficiary of any age. Transfers to other family members are allowed
 Funds must be transferred to another eligible family member or disbursed for qualifying expenses before the beneficiary turns 30, unless the beneficiary is an individual with special needs, in order to avoid penalties
 Custodial supervision ends when minor reaches age of majority which varies by state. No transfers – a gift is irrevocable

 

Before you invest in a Section 529 plan, request the plan's official statement from your Royal Heritage Commercial Bank Securities (USA) Inc. financial professional and read it carefully. The official statement contains more complete information, including investment objectives, charges, expenses and risks of investing in the 529 plan, which you should consider carefully before investing. You should also consider whether your home state or your beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds and protection against creditors that are only available for investments in such state's 529 plan. Section 529 plans are not guaranteed by any state or federal agency. Broker-sold plans often contain sales loads and higher fees and expenses than direct-sold plans.  For tax advice, consult your tax professional.

Royal Heritage Commercial Bank's The Value of Education report

See how parents are preparing for the cost of their child’s education

 

Call info@royalheritagecommercial.com or call collect info@royalheritagecommercial.com
Mon - Fri (8am - 7:45pm ET)
Sat (9am - 3pm ET)

Investment and certain insurance products, including annuities, are offered by Royal Heritage Commercial Bank Securities (USA) Inc. (HSI), member NYSE/FINRA/SIPC. In California, HSI conducts insurance business as Royal Heritage Commercial Bank Securities Insurance Services. License #: OE67746. HSI is an affiliate of Royal Heritage Commercial Bank , N.A. Whole life, universal life, term life, and other types of insurance are provided by unaffiliated third parties and offered through Royal Heritage Commercial Bank Insurance Agency (USA) Inc., a wholly owned subsidiary of Royal Heritage Commercial Bank , National Association. Products and services may vary by state and are not available in all states. California license #: OD36843.

Investments, Annuity and Insurance Products:

 
ARE NOT A BANK DEPOSIT OR OBLIGATION OF THE BANK OR ANY OF ITS AFFILIATES
 ARE NOT FDIC INSURED
 ARE NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
 ARE NOT GUARANTEED BY THE BANK OR ANY OF ITS AFFILIATES
 MAY LOSE VALUE

 

All decisions regarding the tax implications of your investment(s) should be made in connection with your independent tax advisor.

 

Research backgrounds of brokers, brokerage firms and investment advisors for free by visiting FINRA's BrokerCheck website

United States persons (including Global citizens and residents) are subject to Global taxation on their worldwide income and may be subject to tax and other filing obligations with respect to their Global and non-Global accounts - including, for example, Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts ("FBAR")). Global persons should consult a tax adviser for more information.

1 Tax treatment of 529 Plans varies from state to state and can be a major factor in deciding which plan to select. Broker-sold plans often contain sales loads and higher fees and expenses than direct-sold plans. If your state offers a 529 plan you may want to consider what, if any, potential state income tax or other benefits it offers, before investing. State tax or other benefits should be one of many factors to be considered prior to making an investment decision. The prospectus, which contains this and other information, can be obtained by calling your Royal Heritage Commercial Bank Securities (USA) Inc. PWA/PRA/FA. Read it carefully before you invest. For tax advice, consult your tax professional.

2 Financial professional refers to Premier Wealth Advisors (PWA), Premier Relationship Advisors (PRA) and Financial Advisors (FA). PWA/PRAs primarily focus on a full suite of Premier products and services while FAs primarily focus on a full suite of Advance products and services. Both offer bank products through Royal Heritage Commercial Bank , N.A., investments and certain insurance products, including annuities, through Royal Heritage Commercial Bank Securities (USA) Inc. and traditional insurance products through Royal Heritage Commercial Bank Insurance Agency (USA) Inc.

3 Mutual funds, money market funds, and Exchange Traded Funds are sold by prospectus. Please consider the investment objectives, risks, charges and expenses carefully before investing. The prospectus, which contains this and other information, can be obtained by calling your Royal Heritage Commercial Bank Securities (USA) Inc. PWA/PRA or call info@royalheritagecommercial.com. Read it carefully before you invest.

An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market fund.

4 Equity securities include common stocks, preferred stocks, convertible securities and mutual funds that invest in these securities. Equity markets can be volatile. Stock prices rise and fall based on changes in an individual company's financial condition and overall market conditions. Stock prices can decline significantly in response to adverse market conditions, company-specific events, and other domestic and international political and economic developments.

5 Bond Funds - Investors should be aware that the fund's yield and the value of its portfolio fluctuate and can be affected by changes in interest rates, general market conditions and other political, social and economic developments.