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Compare college savings plans

Merrill offers different options to help you plan for college. Choose the account that best meets your college savings needs.

Section 529 Plans

A state-sponsored, tax-advantaged plan to help you invest for higher education.

Custodial account (UGMA/UTMA)

A taxable custodial account invested on behalf of a minor that can be used for any expense that benefits that minor.
See which plan may best meet your needs.

Features and benefits

529 Plans

Invest money for higher education and receive tax-deferred growth. Money can be withdrawn federal, and often state, tax free for qualified higher education expenses.1

Custodial

Investments made on behalf of a minor can be used for any expenses that benefits that minor. You must transfer ownership of the account upon minor reaching the age of termination.

What it covers

529 Plans

Plan covers qualified expenses for higher education, including tuition fees, books, room and board and certain expenses for special聽needs聽beneficiaries and expenses for elementary or secondary public, private or religious schools.1,2

Custodial

There are no restrictions as long as the funds are used to benefit the minor.

Investment options

529 Plans

Options vary by plan. Most plans offer 体育平台app portfolios consisting of underlying 体育平台app or individual mutual fund options.

Custodial

There are no restrictions other than those imposed by state laws, which typically state that a custodian is subject to the "prudent person rule" but is not limited by any other statute restricting 体育平台apps by fiduciaries.

Changing the beneficiary

529 Plans

Beneficiary can be changed to another family member with no tax consequences.

Custodial

The beneficiary cannot be changed.

Tax advantages

529 Plans

Earnings have the opportunity to grow tax-deferred and withdrawals are federal, and often state, tax free when used for qualified higher education expenses.1 The earnings portion of nonqualified withdrawals may be subject to federal income tax, and may be subject to a 10% additional federal tax, as well as applicable state and local income taxes.6 Contributions up to $15,000 for an individual and $30,000 for a married couple annually, or up to $75,000 for and individual or $150,000 for a married couple during a 5-year period are gift tax free.4

Custodial

In 2020, the first $1,100 of a child's income generally is tax-exempt, the next $1,100 of unearned income generally is taxed at the child's tax rate, and unearned income over $2,200 generally is taxed at the parent's tax rate if the child is under 18, or the child is age 18 and does not have earned income that is more than half of his or her financial support, or is a full-time student who is at least age 19 and under age 24 and who does not have earned income that is more than half of his or her financial support if at least one parent is living at the end of the tax year and the child is not filing a joint return for the tax year. (Retroactively for 2018 and 2019, taxpayers may make an election to have the child's parents' tax rate apply instead of the estates and trusts rate that was applicable in 2018 and 2019.) Contribute up to $15,000 ($30,000 for married couples) gift tax-free annually.4

Impact on financial aid

529 Plans

If opened by the parent of the beneficiary, the assets will be treated as the parent's asset, which is currently weighted at 5.6% toward the expected family contribution (EFC) formula.5

Custodial

Treated as the beneficiary's asset, which is weighted at 20% toward the EFC formula.

Contribution and age limits

529 Plans

Most plans allow contributions in excess of $300,000 per beneficiary. Gift tax restrictions apply.4 There are no age limits on contributions or withdrawals.

Custodial

Annual contributions up to $15,000 for individuals or $30,000 for married couples are gift tax free.4 There is no statutorily imposed maximum contribution. There are no age limits on contributions or withdrawals.

Income limits

529 and Custodial

There are no income limitations.
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Important disclosures

Please remember there's always the potential of losing money when you invest in securities.
Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
1 To be eligible for favorable tax treatment afforded to the earnings portion of a withdrawal from a section 529 account, such withdrawal must be used for "qualified higher education expenses," as defined in the Internal Revenue Code. The earnings portion of a withdraw that is not used for such expenses is subject to federal income tax and may be subject to a 10% additional federal tax, as well as applicable state and local income taxes. The additional tax is waived under certain circumstances. The beneficiary must be attending an eligible educational institution at least half time for room and board to be considered a qualified higher education expense, subject to limitations. Institutions must be eligible to participate in federal student financial aid programs. Some foreign institutions are eligible. You can also take a federal income tax-free distribution from a 529 account of up to $10,000 per calendar year per beneficiary from all 529 accounts to help pay for tuition at an elementary or secondary public, private or religious school. For distributions taken after December 31, 2018, qualified higher education expenses now include expenses for fees, books, supplies, and equipment required for the participation of a designated beneficiary in an apprenticeship program registered and certified with the Secretary of Labor under the National Apprenticeship Act and amounts paid as principal or interest on any qualified education loans of the designated beneficiary or sibling of the designated beneficiary, up to a lifetime maximum of $10,000 per individual. Distributions with respect to the loans of a sibling of the designated beneficiary will count towards the lifetime limit of the sibling, not the designated beneficiary. Such repayments may impact student loan interest deductibility. State tax treatment may vary for distributions to pay for tuition in connection with enrollment or attendance at an elementary or secondary public, private or religious school, apprenticeship expenses, and payment of qualified education loans.
Any earnings withdrawn that are not used for such expenses are subject to federal income tax and may be subject to a 10% additional federal tax, as well as applicable state and local income taxes.
2 The beneficiary must be attending an accredited institution at least half time for room and board to be considered an eligible expense.
3 The account owner can change the beneficiary to another member of the family of the original beneficiary without penalty. Please refer to the Internal Revenue Code definition of "member of the family." If assets are contributed from an UGMA/UTMA account, the custodian may not change the designated minor, except as permitted by applicable law.
4 For 2020, contributions can be made up to the federal gift tax exclusion limit of $15,000 per beneficiary per year ($30,000 for married couples electing to split gifts) without incurring federal gift taxes or generation-skipping transfer tax. Although, under the Internal Revenue Service five-year gift rule, you can take advantage of a forward gifting provision that allows you to contribute up to $75,000 ($150,000 for married couples electing to split gifts) per beneficiary in a single year without incurring gift tax. Contributions between $15,000 and $75,000 ($30,000 and $150,000 for married couples electing to split gifts) made in one year can be prorated over a five-year period without subjecting you to gift tax or reducing your federal unified estate and gift tax credit. If you contribute less than the $75,000 ($150,000 for married couples electing to split gifts) maximum, additional contributions can be made without you being subject to federal gift tax, up to a prorated level of $15,000 ($30,000 for married couples electing to split gifts) per year. Gift taxation may result if a contribution exceeds the available annual gift tax exclusion amount remaining for a given beneficiary in the year of contribution. For contributions between $15,000 and $75,000 ($30,000 and $150,000 for married couples electing to split gifts) made in one year, if the account owner dies before the end of the five-year period, a prorated portion of the contribution may be included in his or her estate for estate tax purposes. Please consult your tax and/or legal advisor for such guidance.
5 Financial aid rules may change, and the rules in effect at the time the beneficiary applies may be different. For more complete information visit the Department of Education Web site at www.ed.gov.
6 The 10% additional tax does not apply to withdrawals as a result of the designated beneficiary receiving a scholarship or the designated beneficiary's attendance at a U.S. military academy provided the withdrawals do not exceed the amount of the scholarship or value of attendance at the academy. The 10% additional tax also does not apply as a result of withdrawals made due to the death or disability of the designated beneficiary.
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Before you invest in a Section 529 plan, request the plan's official statement from your Financial Solutions Advisor and read it carefully. The official statement contains more complete information, including 体育平台app 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 体育平台apps in such state's 529 plan. Section 529 plans are not guaranteed by any state or federal agency.