529 Plans
Established under Internal Revenue Code Section 529, 529 College Savings Plans are a tax-deferred way for anyone to invest in a child's education.
How They Work
When you invest in a 529 plan, you're contributing to an account that is controlled either by the state that sponsors the plan or by an outside manager designated by the state. The maximum amount that may be contributed on behalf of each designated beneficiary varies by state and is typically limited to the amount that is necessary to finance the beneficiary's eligible education expenses. A lifetime contribution limit may apply. Minimum investment amounts vary by state but are often $25/month.
How They Can Be Used
The account owner, not the beneficiary, maintains control of the account to help ensure the assets will be spent only for educational purposes. The money from a 529 plan can be used for eligible expenses at accredited post-secondary institutions.Flexibility
Anyone can establish a 529 College Savings Plan account regardless of location or income level, and can name anyone as a beneficiary. And although contributions are considered a completed gift, the donor retains the right to move the money to another beneficiary. Investments may be used at eligible public or private schools nationwide.Tax Savings
Earnings are tax-deferred until withdrawn, and distributions are tax-free at the federal level and may be at the state level as well when used for eligible expenses. Although contributions are not deductible at the federal income tax level, some states offer full or partial deductions if the donor is a resident and participates in his/her own state plan. While contributed amounts are treated as gifts, contributions of up to $12,000 can be made for each designated beneficiary without incurring federal gift tax.Estate planning
An individual may contribute a lump sum that covers five years, giving a total of $60,0001 ($120,000 for married couples), if the individual makes no additional gifts to that designated beneficiary for the five-year period. This may make 529 plans ideal for estate planning for certain individuals.For more information on 529 College Savings Plan accounts, contact a Thrivent Financial representative.
The 529 college savings plans are offered through brokerage arrangements with Thrivent Investment Management Inc. 625 Fourth Ave. S. Minneapolis, MN 55415-1665, 1-800-THRIVENT (800-847-4836). Union Bank and Trust of Lincoln, NE, and Wells Fargo of San Francisco, CA, are the administrators of these plans. Funds invested in the plans have no bank guarantee, are not FDIC insured, and may lose value.
You are advised to consider the investment objectives, risks, and charges and expenses associated with 529 college savings plans before investing. More information on the 529 college savings plan is available in the issuer's official statement. The official statement should be read carefully before investing.
You should investigate whether your state or your beneficiary's state offers a qualified tuition plan for its residents and consider what, if any, potential state income tax advantages or other benefits it offers. Please consult with a tax professional to receive tax analysis of the investments.
1 A $60,000 gift is viewed as an accelerated gift over five years. Any other gifts made to the same beneficiary by the contributor within the five years may result in a federal gift-tax liability. If the contributor dies within the five year period, a prorated portion of the contribution may be included in their taxable estate.
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