Answers to commonly asked questions on 529 savings plans and CollegeAdvantage 529 accounts.
What is a 529 savings plan?
The goal of 529 savings plans is simple – they are investment vehicles designed to help families save for qualified investment expenses without the burden of taxes. The plans are named after a specific section of the IRS Code, which allows investments in “529s” to grow tax-deferred and assets used for expenses like college tuition, books and room and board to be withdrawn free from federal taxes. Additional state tax benefits may also be available depending on your specific plan and state of residence.
Who can be a beneficiary of a BlackRock CollegeAdvantage 529 account?
Any US citizen or legal US resident can be the beneficiary of a BlackRock CollegeAdvantage 529 account. It is not required for the account owner and beneficiary to be related in any way, and if so desired, an account owner is free to name himself/herself as the beneficiary.
Can I change the beneficiary?
You may change the beneficiary of your account, but in order to avoid taxes or penalties, the new beneficiary must be a qualified member of the previous beneficiary's family, unless the account is a Scholarship Account. See the Program Description for details on qualifications. Additionally, you may not change the beneficiary if such a change would cause the aggregate account balances of all CollegeAdvantage Program accounts for the new beneficiary to exceed the Maximum Contribution Limit (currently $377,000).
Who can contribute to a BlackRock CollegeAdvantage 529 Account?
Anyone, including individuals, corporations, charities, partnerships or trusts can contribute to, establish and own accounts.
Can I transfer assets from an UGMA/UTMA account?
Yes, but there are several considerations you should be aware of before doing so. If you are in a custodial role for a minor with a UGMA/UTMA, you may move some or all of the UGMA/UTMA assets to a 529 plan, provided that the minor remains the beneficiary of the new account. Prior to transferring the assets, however, you must liquidate funds from the UGMA/UTMA account and should discuss any resulting tax consequences with your financial professional. Finally, as an UGMA/UTMA custodian, you must notify the 529 plan when the beneficiary reached the legal age of majority, which is 21 in most states.
How will having assets with BlackRock CollegeAdvantage hurt a beneficiary's chances for financial aid?
Financial aid treatment changes often and each school maintains its own policies, so it is of the utmost importance that you inquire about your unique situation when considering how 529 assets will affect any financial aid package. As a general rule, however, assets held in a 529 plan are treated as parental assets if one parent is the account owner. If the student is the account owner and beneficiary or is considered “independent” for financial aid purposes, any 529 assets will be attributed to the student. You should consult with your financial professional to determine how any 529 plan assets will be treated according to your specific circumstances.
What if the beneficiary does not need the assets?
A key advantage of all 529 plans is that the assets remain in the control of the account holder. If the selected beneficiary does not need the assets for any reason, you have several options available to you:
- You can select a new beneficiary provided he/she are a qualified family member related to the previous beneficiary. Qualifications are listed in the Program Description and such a change may represent a taxable event.
- You can take a non-qualified distribution to use as you see fit, but it is important to note that federal income taxes, penalties and state/local taxes may apply to the portion of your assets attributable to earnings.
- You can simply keep your assets in the 529 plan in the event that the original beneficiary changes his/her mind.
BlackRock CollegeAdvantage is sponsored by the state of Ohio. Do 529 plans differ from state to state?
Yes. The main differences from state to state are the investment options offered to account holders and tax benefits available to residents of the sponsoring state. While BlackRock CollegeAdvantage is available to investors across the country and offers uniform federal tax benefits to all account holders, investors in Ohio can take advantage of additional state tax advantages. Prior to investing in any 529 plan, it is recommended that you consult a tax professional or financial professional to make sure all tax consequences are considered before opening an account.
What happens if I move to another state?
Unless you are moving to or away from Ohio, there will be no changes to your BlackRock CollegeAdvantage account. Since BlackRock has partnered with the Ohio Tuition Trust Authority, you would gain a state tax advantage should you move into Ohio. Conversely, you could lose that tax advantage if you leave Ohio and are no longer considered a resident of the state.
An investor should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. More information about municipal fund securities is available in the issuer's Program Description. You may obtain a Program Description by clicking here or calling 866-529-8582. The Program Description should be read carefully before investing.
Any investment in a BlackRock CollegeAdvantage mutual fund-based investment option is not insured or guaranteed by the FDIC or any other governmental agency or other party, including the custodian/state of Ohio, the Tuition Trust, BlackRock or any of the mutual fund firms under contract with the Ohio Tuition Trust Authority. An investment in a BlackRock CollegeAdvantage mutual fund-based investment option is not a direct investment in a mutual fund itself. Participants assume all investment risk of an investment in the BlackRock CollegeAdvantage 529 Plan, including the potential loss of principal and liability for penalties such as those levied for non-educational withdrawals. Regular investing does not ensure a profit or protect against a loss in a declining market. The amount actually available for withdrawal will depend on the investment performance of the investment options chosen.
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