Compare savings options

Summarizes and compares the features of 529 plans, ESAs, UTMAs, IRAs, and education savings bonds.

YEAR 2013 RULES	529 Plan	UGMA/UTMA
Federal Income Tax	Non-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expenses	Earnings and gains taxed to minor; first $1000 of unearned income is tax exempt; unearned income over $2,000 for certain children through age 23 is taxed at parents rate
Federal Gift Tax Treatment	Contributions treated as completed gifts; apply $14,000 annual exclusion, or up to $70,000 with 5-year election	Transfers treated as completed gift; apply $14,000 annual gift exclusion
Federal Estate Tax Treatment	Value removed from donor's gross estate; partial inclusion for death during a 5-year election period	Value removed from donor's gross estate unless donor remains as custodian
Maximum Investment	Established by the program; many in excess of $300,000 per beneficiary	No limit
Qualified Expenses	Tuition, fees, books, supplies, equipment, special needs; room and board for minimum half-time students	No restrictions
Able to Change Beneficiary	Yes, to another member of the beneficiary's family	No; represents an irrevocable gift to the child
Time/Age Restrictions	None unless imposed by the program	Custodianship terminates when minor reaches age established under state law (generally 18 or 21)
Income Restrictions	None	None
Federal Financial Aid	Counted as asset of parent if owner is parent or dependent student	Counted as student's asset
Investments	Menu of investment strategies as developed by the program	As permitted under state laws
Use for Nonqualifying Expenses	Withdrawn earnings subject to federal tax and 10% penalty	Funds must be used for benefit of the minor