Get the Most out of your 529 Plan
529 education saving plans do more than just help save for education expenses.
An investor should consider the Program's investment objectives, risks, charges and expenses before investing. The Program Disclosure Statement and Participation Agreement (www.scholars-choice.com/pds) contains more information and should be read carefully before investing.
If an investor and/or an investor's beneficiary are not Colorado taxpayers, they should consider before investing whether their home states offer 529 plans that provide state tax and other benefits such as financial aid, scholarship funds and protection from creditors that are only available to state taxpayers investing in such plans.
Own Your Strategy:
The Added Benefits of 529 Investing
Annual Tax Advantages
Investing in a 529 college savings plan will allow your investment to grow tax-deferred as long as the money remains in your Scholars Choice® account — with qualified withdrawals for higher education expenses (e.g., tuition, housing, books and required supplies) being free from federal income tax.1 529 plan withdrawals can also be used to pay tuition at private or parochial elementary or secondary schools (up to $10,000/yr). And for Colorado taxpayers, every dollar you contribute can be deducted from your Colorado taxable income.2
Be Flexible and Reduce Your Taxable Estate
Contributions to a 529 plan are considered completed gifts that remove assets from a taxable estate. By choosing to place your money, up to $30,000/beneficiary each year, in a 529 plan – instead of in an irrevocable trust – you retain a greater degree of control of your assets. Your financial advisor can provide more details on this Estate Planning Approach.
Accelerate Contributions, While Reducing the Tax Burden
A unique tax provision allows you to contribute five times the annual gift tax exclusion ($150,000 for couples filing jointly, $75,000 for an individual) per beneficiary without any federal gift tax consequences. That can significantly reduce your taxable estate — while boosting the investment earnings through tax-deferred compounding. Ask your financial advisor about Accelerated Gifting.
Control Retirement Income
With most IRA and retirement plan accounts, investors are required to start taking required minimum distributions (RMDs) at age 70 1/2 or they could face penalties. If you don’t need the RMD money, consider transferring all or part of the distribution into a 529 plan. It’s a smart way to keep control of your assets and continue to shield income from taxes.
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1 The earnings portion of any non-qualified withdrawal is subject to federal income taxes, applicable state income tax and an additional 10% federal tax penalty.
2 For account owners and contributors to an account who are Colorado income taxpayers, contributions to a Scholars Choice account generally are Colorado state tax deductible to the extent of their Colorado taxable income for the year.
All investments involve risk, including loss of principal. Past performance is no guarantee of future results.
IMPORTANT INFORMATION: An investor should consider the Program's investment objectives, risks, charges and expenses before investing. The Program Disclosure Statement and Participation Agreement contains more information and should be read carefully before investing. If an investor and/or an investor's beneficiary are not Colorado taxpayers, they should consider before investing whether their home states offer 529 plans that provide state tax and other benefits benefits such as financial aid, scholarship funds, and protection from creditors that are only available to state taxpayers investing in such plans.
Investments in the Scholars Choice College Savings Program are not insured by the FDIC or any other government agency and are not deposits or other obligations of any depository institution. Investments are not guaranteed by the State of Colorado, CollegeInvest, QS Investors, LLC, Legg Mason Investor Services, LLC, or Franklin Resources, Inc., or its affiliates and are subject to risks, including loss of principal amount invested.
Franklin Resources, Inc., its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
Scholars Choice® is a registered service mark of CollegeInvest. CollegeInvest and the CollegeInvest logo are registered trademarks. Administered and issued by CollegeInvest, State of Colorado. QS Investors, LLC is the Investment Manager and Legg Mason Investor Services, LLC is the primary distributor of interests in the Program; together they serve as Manager of the Program. QS Investors, LLC, ClearBridge Investments, LLC, Brandywine Global Investment Management, LLC, Western Asset Management Company, and Legg Mason Investor Services, LLC are subsidiaries of Franklin Resources, Inc. Such entities became subsidiaries of Franklin Resources, Inc. in connection with Franklin Resources, Inc.’s acquisition of Legg Mason, Inc. in a transaction that closed on July 31, 2020. Templeton Global Advisors Limited, which is part of Franklin Templeton Investments, is also an affiliate of Franklin Resources, Inc. Thornburg Investment Management, Inc. is not affiliated with Franklin Resources, Inc.
Audited financial statements for the Scholars Choice® College Savings Program, including balance sheets, income statements, cash flow statements, and the Management's Discussion and Analysis (MDA), may be viewed at https://www.collegeinvest.org/about-us/financial-statements or a hard copy may be obtained by calling Scholars Choice at 1-888-572-4652.
CollegeInvest -- a division of the Colorado Department of Higher Education, which oversees the Colorado-sponsored 529 college savings programs -- has decided to retain TIAA-CREF Tuition Financing, Inc. (“TFI”) as the successor program manager for Scholars Choice. TFI intends to utilize funds managed by Nuveen, an investment manager affiliate of TFI, in managing Scholars Choice portfolios. Legg Mason, through its subsidiaries QS Investors, LLC and Legg Mason Investor Services, LLC, will work with TFI to transfer program assets, records, and management responsibilities while continuing to provide services under the terms of the services agreement on a transition basis, until such time as the transfer is completed. The goal of the parties is to complete the transfer in or about June 2021.