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Summarizes and compares the features of 529 plans, ESAs, UTMAs, IRAs, and education savings bonds.
|YEAR 2016 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|Federal Income Tax||Non-deductible contributions; withdrawn earnings excluded from income to extent of qualified higher education expenses||Earnings and gains taxed to minor; first $1050 of unearned income is tax exempt; unearned income over $2,100 for certain children under age 24 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, computers and related equipment, supplies, 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of investment strategies as developed by the program||As permitted under state laws||Use for Nonqualifying Expenses||Withdrawn earnings subject to federal tax and 10% penalty||Funds must be used for benefit of the minor|