|Type of Account||529 College Savings Plans||Custodial Brokerage Account (UGMA and UTMA)||Roth IRA for Kids|
|How is this account typically used?||Saving for future college expenses||Creating an investment account for a minor||Saving for a minor's future retirement|
|Who controls the account?||The account owner, regardless of the beneficiary's age||The account custodian (adult), until the minor reaches the required age||The account custodian (adult), until the minor reaches the required age|
|What are the minimum and maximum contribution limits?||
$50 minimum to open (with Fidelity); most plans allow $200,000 or more maximum
|No limits on the amount that can be deposited||No minimum to open; yearly contributions cannot exceed $5,500 or the amount the minor earns that year, whichever is less (across all IRAs established for the minor)|
|Are earnings and withdrawals subject to taxes?||Earnings are tax deferred and qualified withdrawals are free from federal income tax (see below for definition of qualified withdrawals); additional benefits vary by state.||Earnings and withdrawals are subject to taxes||Earnings are federally tax-free after the five-year aging requirement has been satisfied and certain conditions are met;1 amounts contributed are always available for tax-free withdrawal|
|How much can I contribute each year before my gift is subject to the federal gift tax and reduces my lifetime exemption?||
$14,000 per year per beneficiary ($28,000 if married, filing jointly) or you may accelerate a 5-year gift of $70,000 ($140,0002 if married, filing jointly)
|$14,000 per year ($28,000 if married, filing jointly)||Yearly contributions cannot exceed $5,500; therefore, the annual gift tax exclusion amount is not reached|
|How can the money be used?||
For qualified educational expenses (e.g., tuition, mandatory fees, books, certain room and board costs); use of funds for non-qualified expenses are subject to federal (and possibly state) tax and a 10% penalty tax
|The custodian must use the assets for the benefit of the minor; there are no restrictions once the assets are transferred to the minor at the required age||
There are no restrictions on how distributions can be used.
(Note: Certain exceptions to IRS early withdrawal penalties are limited to specific uses for amounts distributed.)
|How does the value of this account affect financial aid for college?||Low impact on financial aid if a parent is the account owner
||Assets are considered to be the property of the student and may reduce financial aid
||Assets are not considered for FAFSA, but individual institutions may differ
1. One of: age 59½ or older, death, disability, qualified first-time home purchase
2. In order for an accelerated transfer to a 529 plan (for a given beneficiary) of $70,000 (or $140,000 combined for spouses who gift split) to result in no federal transfer tax and no use of any portion of the applicable federal transfer tax exemption and/or credit amounts, no further annual exclusion gifts and/or generation-skipping transfers to the same beneficiary may be made over the five-year period, and the transfer must be reported as a series of five equal annual transfers on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. If the donor fails to survive the five-year period, a portion of the transferred amount will be included in the donor's estate for estate tax purposes.
For 529 accounts only, the new beneficiary must have one of the following relationships to the original beneficiary: 1) a son or daughter; 2) stepson or stepdaughter; 3) brother, sister, stepbrother, or stepsister; 4) father or mother or an ancestor of either; 5) stepfather or stepmother; 6) first cousin; 7) son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law; or 8) son or daughter of a brother or sister. The spouse of a family member (except a first cousin's spouse) is also considered a family member. However, if the new beneficiary is a member of a younger generation than the previous beneficiary, a federal generation-skipping tax may apply. The tax will apply in the year in which the money is distributed from an account.