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Starting in 2024, you can roll unused 529 assets to a Roth IRA established for the beneficiary subject to certain conditions.


Below are descriptions of certain key terms. Please refer to the Plan Description and Master Agreement for more complete definitions of these terms.

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529 Plan
A state-sponsored, tax-advantaged college savings program established under and operated in accordance with IRC §529 to help save for qualified education expenses. Back to top
A savings trust account established by an Account Owner pursuant to the Savings Trust Agreement for purposes of investing in one or more portfolios. Accounts are part of the Plan and are held in the name of the Plan on behalf of and for the benefit of the Account Owners and the Beneficiaries. Back to top
Account Owner
The individual or entity signing the Application and establishing an Account or any successor to such individual or entity. References in this Glossary to “you” or “your” mean the Account Owner in such capacity.Back to top
Annual Rate of Return
The rate of return on your investment, expressed as a percentage of the total amount invested. Back to top
The LoneStar 529 Plan® enrollment form used to collect eligibility information and establish an Account.Back to top
Asset Allocation
A strategy for maximizing gains while minimizing risks in your investment portfolio. Asset allocation involves dividing your assets on a percentage basis among different broad categories of investments, including equity, fixed income, and money market.Back to top
Automatic Investment Plan (AIP)
Contributions to your Account in a fixed amount of money in regular intervals. Funds are automatically deducted from the Account Owner’s bank account or other financial institution, or through payroll deductions. Back to top
The individual identified by the Account Owner whose qualified education expenses are expected to be paid from the Account or, for Accounts owned by a state or local government or qualifying tax-exempt organization (otherwise known as a 501(c)(3) entity) as part of its operation of a scholarship program, the recipient of a scholarship whose qualified education expenses are expected to be paid from the Account. Any individual may be the Beneficiary of an Account, including the Account Owner.

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. Back to top
The Texas Prepaid Higher Education Tuition Board.Back to top
Class A Units
Generally available units that require an up-front sales charge plus an on-going distribution/service fee. No fees are separately assessed by a Financial Advisor. Back to top
Class RIA Units
Investment units available only through qualifying fee-based Registered Investment Advisors (RIAs) or investment advisor representatives.

Class RIA units do not have an up-front sales charge or an asset-based distribution/service fee. Rather, fees will be assessed separately by the Financial Advisor. Back to top
Code, or IRC
The Internal Revenue Code of 1986, as amended.Back to top
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Eligible Educational Institution
Accredited post-secondary educational institution offering credit toward a bachelor’s degree, an associate’s degree, a graduate-level or professional degree, or another recognized post-secondary credential that is eligible to participate in certain federal student financial aid programs. Certain proprietary institutions, foreign institutions, and post‑secondary vocational institutions are also included, as are certain specified military academies.Back to top
Enrollment Year
The expected college enrollment year of your beneficiary, typically at age 18.Back to top
Estimated Annual Asset-Based Plan Fees
You can find a more detailed description of the fees and expenses charged by the Plan in the Plan Description and Savings Trust Agreement.

• Distribution Charge— Amount paid to financial advisors to cover the costs of distributing units to Account Owners. This charge applies only to Class A units.

• Sales Charge— A front-end charge assessed on the purchase of Class A units. The plan distributor retains a portion of the charge and pays the rest to the financial advisor.

• Program Management Fee— Fee paid to the plan manager for daily administration and investment-related services, such as audits, recordkeeping, and preparing and printing statements and reports.

• State Administrative Fee— Fee paid to the Board to administer and maintain the Plan, such as the cost of an independent audit, investment consultant fees, and outside legal counsel fees as necessary.

• Underlying Investment Fund Expenses— Fee deducted directly from the underlying investments by the investment manager for each underlying investment in a portfolio. This expense is captured as part of the weighted average expense ratio for each portfolio.
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Financial Advisor
Any individual or entity that is appropriately licensed and who has entered into an agreement with the Plan Distributor to distribute Savings Trust Agreements and interests in the Plan represented by Accounts to public investors. This term may include brokers and financial intermediaries such as investment advisors or banks.Back to top
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The Internal Revenue Service.Back to top
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Maximum Texas Program Contribution Limit
The maximum contribution balance (currently $500,000 per Board approval) 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.Back to top
Member of the Family
For purposes of changing the Designated Beneficiary, the definition of a “Member of the Family” of the Designated Beneficiary is:

1. a son or daughter, or a descendant of either
2. a stepson or stepdaughter
3. a brother, sister, stepbrother, or stepsister
4. the father or mother, or an ancestor of either
5. a stepfather or stepmother
6. a son or daughter of a brother or sister
7. a brother or sister of the father or mother
8. a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law
9. the spouse of the Beneficiary or of any of the foregoing individuals
10. a first cousin

For purposes of determining who is a “Member of the Family,” a legally adopted child of an individual shall be treated as the child of such individual by blood. The terms “brother” and “sister” include half-brothers and half-sisters.Back to top
Net Asset Value (NAV)
Equal to a portfolio’s total assets less its total liabilities. For portfolios with multiple classes, Net Asset Values are determined separately for each share class. NAV per share is equal to the portfolio’s share class Net Assets divided by its number of shares outstanding.Back to top
Non-qualified Withdrawals
A distribution from an Account that is not used to pay for qualified education expenses. Non-qualified withdrawals are subject to ordinary federal income tax, an additional 10% federal tax on earnings, and any applicable state income tax or recapture of state tax deductions.Back to top
The LoneStar 529 Plan, which is a 529 Plan.Back to top
Plan Governing Documents
The primary instruments governing the agreement between the Plan and the Account Owner.

• Plan Description—Similar to a mutual fund’s prospectus, the Plan Description provides detailed information about the Plan, including investment options, fees, and expenses.

• Savings Trust Agreement—The Savings Trust Agreement is the contract between the Account Owner and the Board, which establishes the Account and the obligations of the Board and the Account Owner.
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Qualified Education Expenses
Undergraduate and graduate 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 if 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. Qualified education expenses can also include:

• reasonable room and board for beneficiaries who are enrolled at least half-time at an eligible educational institution;
• fees, books, supplies, and equipment necessary to participate in a registered apprenticeship program;
• the repayment of up to $10,000 (lifetime per student) in student loans for the beneficiary or the beneficiary’s sibling; and
• K-12 tuition for a public, private, or religious school (up to $10,000 per year per beneficiary), although the tax consequences of using a 529 plan for elementary or secondary education tuition expenses will vary depending on state law and may include the recapture of tax deductions received as well as penalties. You should consult a tax or legal advisor before using the plan for K-12 tuition.Back to top
Qualified Withdrawals
A distribution from an Account that is used to pay for qualified education expenses for the Beneficiary at an Eligible Educational Institution. These withdrawals are tax free and cover expenses such as tuition, room and board for some students, books, supplies, and other equipment intended for college use.Back to top
Registered Investment Advisor (“RIA”)
An individual or firm that advises clients on their investments and may manage their investment portfolios. RIAs typically earn their income through management fees, which are often calculated as a percentage of a client’s assets under management by the RIA.Back to top
Risk-based Portfolios
Investment vehicles featuring the flexibility to choose from among several investment options that may align with your tolerance for risk, your time horizon, and other factors.Back to top
A transfer of funds from one qualified 529 Plan account to another qualified 529 Plan account. If the transfer is completed within 60 days and is made to an account for the same Beneficiary or a Member of the Family, the rollover may be considered a tax-free transaction. Please see the Plan Description for specific situations. Funds in a qualified 529 plan account may also be rolled over to a qualified ABLE program account tax free before January 1, 2026, provided certain conditions are met.Back to top
Sales Charge
The up-front fee charged when you purchase Class A units of a Section 529 portfolio sold through a Financial Advisor. The fee is deducted from the purchase and reduces the amount available to buy units of the portfolio. The sales charge may be waived for certain investors based on circumstances, including at the discretion of your Financial Advisor.Back to top
Section 529
Section 529 of the Internal Revenue Code specifies the requirements for qualified tuition programs (529 Plans).Back to top
Successor Account Owner
A successor account owner becomes the owner of the account in the event of the death of the Account Owner.Back to top
Target Enrollment Year Portfolios
An investment vehicle that invests based on the year your Beneficiary is expected to begin using the funds for qualified education expenses (i.e., enrollment year). The asset allocation between equities, bonds, and cash automatically adjusts every six months as the enrollment year approaches, providing a consistent risk reduction path for investments along the way.Back to top
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Underlying Investments
One or more mutual funds or other investment vehicles in which assets of a portfolio are invested.Back to top
An interest in a portfolio that is purchased with contributions to an Account.Back to top
Unit Class
A 529 Plan may offer more than one “class” of units to investors interested in investing through an advisor. Each class represents a similar type of interest in the plan’s portfolios, but each has different fees and expenses.Back to top

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