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Back in the day, your parents, grandparents, or some other random person might have chosen to express their financial affection by depositing money in a qualified account under the Universal Transfer to Minors Act (UTMA).  The UTMA, itself an extension of the Universal Gifts to Minors Act (UGMA), was originally proposed in 1986 and was ratified as law in most states shortly thereafter.  This law provided a mechanism to transfer ownership of securities, such as stocks, bonds, and mutual funds, to a minor without the complexity of establishing a trust fund.  They were quite popular throughout the 90's, and many young adults today find themselves approaching, or having recently surpassed, the age at which they assume custodianship of these account (18 or 21, depending on the state).

In 2001, things got more complicated: with the passage of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), there was now another option to pass some cash on to the next generation: the USC 26 Section 529 Education Savings Plan (529 Plan).


The 529 Plan is designed to be an improvement over a UTMA account in most situations, but like most things in life, you can't get something for nothing.

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In the previous article, I discussed how an estate planner could potentially use a 529 Education Savings Plan to unload a significant sum of money without tax consequences.  But what are the consequences if you find yourself or your children on the receiving end of a 529 Plan?

How 529 Plan assets and withdrawals affect the beneficiary's student financial aid eligibility depends on who owns the Plan.

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We've discussed the 529 Education Savings Plan before: it's by far the best way to save for future education expenses, and it's even useful for graduate students looking to invest when they can't contribute to an IRA.


There's one other group of people that really love 529 Plans: estate planners.

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This article provides a brief overview of the history and utility of the 529 Education Savings Plan, followed by a discussion of how to choose the best 529 Plan for your state of residency and investment time horizon.  It includes links to resources for further researching your plan options and a simple calculator for making the decision between home-state tax-incentivized and out-of-state low-cost plans.

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In school? You have options! (X1)

It is a shame that graduate students - a group who could very much use the opportunity to avoid falling behind their better-paid peers in saving and investing - are very often ineligible to contribute to a Roth IRA.

However, all is not lost!  Some graduate students are made eligible by other sources of income, and all graduate students can engineer around the problem with another qualified savings and investment option: the 529 Plan.