LoneStar 529

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LoneStar vs. Other Savings Options

You can save for your family's higher education needs in many ways. And while everyone's situation and financial goals are different, you may find that the LoneStar 529 Plan offers you benefits you won't find anywhere else.

LoneStar vs. Other Savings Options

Advantages

  • Account owner retains control of assets
  • Earnings grow tax deferred
  • Qualified withdrawals free of federal taxes
  • Estate and federal gift tax benefits
  • High contribution limits
  • No income or age restrictions
  • Can be used for broad range of higher education costs
  • Flexible beneficiary designation
  • Portability—may transfer assets to a different 529 plan

Possible Limitations

  • Investment options potentially limited to those offered by the LoneStar 529 Plan
  • Nonqualified withdrawals are subject to ordinary federal and any applicable state income tax and an additional 10% federal tax
  • Assets may only be reallocated once per calendar year or upon a change in beneficiary



Coverdell Education Savings Account

Advantages

  • Qualified withdrawals free of federal taxes
  • Flexible beneficiary designation
  • Can be applied to elementary, secondary and higher education expenses
  • Money can be gifted to child who can open own account, bypassing income restrictions
  • Investment flexibility
  • Considered a parent asset for federal aid purposes if parent is the owner

Possible Limitations

  • Income restrictions
  • $2,000 annual contribution limit1
  • 10% tax penalty on nonqualified withdrawals
  • Age restriction
  • Contributions for students 18 or older are not allowed except for special needs students
  • Withdrawals must be made by student's 30th birthday and/or certain penalties may apply (except for special needs students)



UGMA/UTMA Account

Advantages

  • Portion of earnings taxable at student's rate
  • No limit on amount transferred to account
  • Investment flexibility
  • Unrestricted use of assets, provided it is for the benefit of the minor

Possible Limitations

  • Considered student assets for financial aid purposes
  • Adult loses control of assets when child reaches legal age
  • Annual transfers in excess of $13,000 subject to gift tax
  • Irrevocable gift and may not be transferred to anyone else
  • No tax deferral on earnings



 

1. Scheduled to sunset after the year 2010.