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Frequently Asked Questions


Opening an Account

You can start opening an account by:

Downloading or ordering an Enrollment Kit and mailing in an Enrollment Application.

You must designate a financial advisor on your application when you enroll in the plan. A financial advisor is any individual or entity that is appropriately licensed and who has entered into an agreement with the plan distributor to distribute interests in the plan. This term may include brokers, and financial intermediaries, such as investment advisors or banks. The Board has authorized certain financial advisors to accept applications and distribute units in the plan. All account owners are eligible to purchase any class of units, but not all unit classes are available through all financial advisors.

The account owner’s financial advisor will receive transaction confirmations and, upon request of the financial advisor, quarterly statements and tax forms.

You can open a LoneStar 529 Plan account with as little as $25, and subsequent contributions can be as small as $15 when funding an account through an Automatic Investment Plan (AIP) or payroll deduction. There is a maximum contribution limit of $500,0001 per beneficiary aggregated across all accounts in Texas‑sponsored 529 plans that cannot be exceeded through additional contributions. Accounts that have reached the limit may continue to accrue earnings, but additional contributions are prohibited.

1 The maximum contribution limit is currently $500,000 per Designated Beneficiary aggregated across all accounts in Texas-sponsored 529 plans and cannot exceed this limit. Accounts that have reached the limit may continue to accrue earnings, but additional contributions, including those from Rollovers, are prohibited. See the Plan Description and Savings Trust Agreement for details.

Using An Account

You can make a contribution any time online at My Account. Funds can automatically be transferred from your bank account on a regular basis using an Automatic Investment Plan (AIP).

You can request a withdrawal online at My Account or you can complete a Withdrawal Request Form and mail it in. Payments can be made directly to the educational institution, account owner or beneficiary. For details, please check the Plan Description and Savings Trust Agreement.

You can use the account maintenance features at My Account to:

  • Change Your Investment Options
  • Add or Change Your Successor Account Owner
  • Establish, Change or Delete Your Automatic Investment Plan
  • Change Your Elected Investment Allocation
  • Change Your Address or Phone Number(s)
  • Alternatively, you can use the Account Maintenance Form to update your account

You can take money from your account at any time. However, if the money is not used to pay for qualified higher education expenses, earnings will be subject to ordinary federal income tax and any applicable state income tax, as well as an additional 10% federal tax.

About the LoneStar 529 Plan

Named after Section 529 of the Internal Revenue Code, state-sponsored 529 plans are tax-advantaged investment plans to save for qualified higher education expenses. Also referred to as qualified tuition programs, 529 plans are specifically designed to help families—regardless of income level—save for college expenses such as undergraduate and graduate school tuition and fees, books and equipment, and room and board at Texas public and private colleges and universities, out-of-state colleges and universities, and career schools, registered apprenticeship programs, student loan repayment and K-12 tuition. Investments grow tax deferred, and withdrawals for qualified education expenses are federal tax free.

Recent tax reform legislation changes allowing for payment of K-12 tuition were on a federal level, and the tax consequences of using 529 plans for elementary or secondary education tuition expenses will vary depending on state law and may include recapture of tax deductions received from the original state as well as penalties. The account owner should consult with a tax or legal advisor before using the plan for K-12 tuition.

All U.S. citizens and permanent resident aliens 18 years of age or older with valid Social Security numbers can establish and invest in the LoneStar 529 Plan. There are no income or state residency restrictions. Accounts can also be established by a corporation, partnership or trust; a state or local government, or tax-exempt organization described in Section 501(c)(3) of the Internal Revenue Code; or a custodian under a UGMA/UTMA account.

Any U.S. citizens and permanent resident aliens 18 years of age or older with valid Social Security numbers can open an account in the LoneStar 529 Plan. Your beneficiary, the individual whose qualified education expenses you will be paying through the plan, can be anyone, including yourself. For instance, you can set up an account for your client’s child, grandchild, spouse, or someone who is not related to your client. If your client is planning to attend college or graduate school, you can open an account for them.

A government entity or 501(c)(3) not-for-profit organization can establish an account to fund scholarship programs without designating a beneficiary at the time the account is established.

The LoneStar 529 Plan is open to all U.S. citizens or permanent resident aliens 18 years of age or older with a valid Social Security number, without any state residency restrictions.

No. The money can be used at any accredited public or private post-secondary institution in the U.S. and abroad. This includes most two- and four-year public and private colleges and universities, career schools, graduate schools, and medical and dental institutions. With certain restrictions, the money can also be used for K-12 tuition, registered apprenticeship programs and student loan repayment. You should consult with a tax or legal advisor to determine such consequences.

Recent tax reform legislation changes allowing for payment of K-12 tuition were on a federal level, and the tax consequences of using 529 plans for elementary or secondary education tuition expenses will vary depending on state law and may include recapture of tax deductions received from the original state as well as penalties. The account owner should consult with a tax or legal advisor before using the plan for K-12 tuition.

If you are a non-resident of Texas, you should consider whether your home state, or your beneficiary’s home state, offers residents any tax or other state benefits, such as financial aid, scholarships, and/or protection from creditors, that are only available for participants in that state’s 529 plan. You may wish to contact your home state’s 529 plan(s) to learn more about those plans’ features, benefits, and limitations. Keep in mind that state‑based benefits should only be one of many appropriately weighted factors to be considered when deciding whether to open an account. You should consult your financial, tax, or other advisor to learn more about any state‑based benefits or any limitations that might apply to your specific circumstances.

An “eligible educational institution” is any accredited college, university, or vocational school that is eligible to participate in certain federal financial aid programs under the Higher Education Act of 1965, including some foreign institutions. To determine whether the school your beneficiary might attend is included, please visit the Federal Student Aid website at www.studentaid.gov

Section 529 of the Internal Revenue Code defines “qualified higher education expenses” as tuition, fees, books, supplies, and equipment required for a beneficiary’s enrollment or attendance at an eligible educational institution. The term includes computers and peripherals, software (except for non-educational sports, games, or hobby software), and internet service, provided they are used primarily by the beneficiary while enrolled at an eligible educational institution. Expenses for special needs services incurred in connection with enrollment or attendance at an eligible educational institution are also included in the definition.

For beneficiaries who are enrolled at least half-time at an eligible educational institution, qualified higher education expenses include reasonable room and board. The amount of room and board cannot exceed the greater of: (1) the allowance included in the “cost of attendance,” as defined under federal law, as determined by the eligible educational institution for the period; or (2) the actual invoice amount charged to the beneficiary for room and board, if the beneficiary resides in housing owned or operated by the eligible educational institution.

The following expenses are also treated as qualified higher education expenses under Code Section 529 of the Internal Revenue Code:

  • Up to $10,000 per year of your beneficiary’s K-12 tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school;
  • Fees, books, supplies, and equipment necessary to participate in a registered apprenticeship program; and
  • Up to $10,000 in amounts paid as principal or interest on any qualified education loan (as defined in Code §221(d)) of the beneficiary or a sibling of the beneficiary (“qualified student loan repayments”).

Recent tax reform legislation changes allowing for payment of K-12 tuition were on a federal level, and the tax consequences of using 529 plans for elementary or secondary education tuition expenses will vary depending on state law and may include recapture of tax deductions received from the original state as well as penalties. The account owner should consult with a tax or legal advisor before using the plan for K-12 tuition.

While federal law allows 529 plans to be used for certain elementary or secondary education tuition expenses, state tax consequences vary and may include the recapture of state tax deductions as well as penalties. You should consult with a tax or legal advisor to determine such consequences.

Whether your account will affect your beneficiary’s eligibility for federal financial aid depends on the beneficiary’s relationship to the purchaser. Texas law provides that assets in your account may not be considered in determining eligibility for Texas-sponsored student financial aid. For school-based financial aid, the effect of being an account owner or beneficiary varies from institution to institution. You are advised to consult a financial aid professional and/or the state or educational institution offering a financial aid program to determine the impact of participating in the plan.

If your beneficiary receives a scholarship for higher education expenses, you can withdraw an amount equal to the value of the scholarship from your account. Earnings on the amount you withdraw would be taxed at your tax rate but will not be subject to the additional 10% federal tax.

As the account owner, you always have control of your withdrawals. If the beneficiary chooses not to attend college, you have three options:

  • Keep the funds in the account. Since there are no age restrictions on the investments, they will be available in future years if the beneficiary changes his or her mind about school.
  • Change the beneficiary. You can change your beneficiary at any time without tax implications, provided that your new beneficiary is a Member of the Family of the existing beneficiary. You should consult your tax advisor to determine whether this may create a taxable gift.
  • Make a nonqualified withdrawal. Earnings will be subject to federal income taxes and any applicable state tax for non-Texas residents, as well as an additional 10% federal penalty unless you qualify for an exception to the penalty.

  • Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary;
  • Made if the designated beneficiary becomes disabled in accordance with federal law;
  • Made on account of the attendance of the designated beneficiary at a U.S. military academy (to the extent that the amount of the distribution doesn’t exceed the costs of advanced education as defined in section 2005(d)(3) of title 10 of the U.S. Code attributable to such attendance);
  • Included in income because the designated beneficiary received a tax-free scholarship or fellowship grant, veterans’ educational assistance, employer-provided educational assistance or other non-taxable payments received as educational assistance (to the extent the distribution isn’t more than the scholarship, allowance or payment); and
  • Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit.

Investment Options

See recent Performance, or Prices on our website.

Should your goals or needs change, you have the flexibility to rebalance your existing investment options twice per calendar year to different portfolios available within the Plan. See the Plan Description and Savings Trust Agreement for details.

Rollover and Transfer

Yes, the IRS allows a tax-free rollover from one 529 account to another 529 account of the same beneficiary or a Member of the Family of the beneficiary if these requirements are satisfied:

  • The rollover to the new plan must occur within 60 days of the distribution from the previous plan;
  • Only one rollover from a 529 plan to another 529 plan per twelve-month period for the same beneficiary is allowed. This restriction does not apply to a Member of the Family of the existing beneficiary.

For further details on rollovers from a 529 plan to another 529 plan account, see the Plan Description and Savings Trust Agreement. Complete our Rollover Form.

Yes. Under the 2017 Tax Cuts and Jobs Act, you may roll over 529 plan assets to a qualified Achieving a Better Life Experience (“ABLE”) program account for the same beneficiary, or a Member of the Family who meets the eligibility requirements of ABLE, within 60 days of the distribution from the 529 account. For these purposes, the Internal Revenue Code Sec. 529 definition of a Member of the Family applies.

All contributions made to an ABLE account for a taxable year, including any rollover amounts, cannot exceed the annual ABLE contribution limit (currently $16,000). The Treasury Department and Internal Revenue Service (“IRS”) have stated that, in the case of a direct transfer, any rejected contribution returned to a 529 plan account would not be treated as a new contribution to that account. For further details on rollovers from a 529 plan to an ABLE account, see the Plan Description and Savings Trust Agreement. If you are planning on rolling over your LoneStar 529 Plan Account to the Texas ABLE Plan, complete our Rollover Form.




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