Education Planning Common Questions

My child is the beneficiary of a 529 plan. Can we use the 529 funds for her private elementary or secondary school?

Answer:

No, 529 funds can't be used to pay for an elementary or secondary school education. They can be used only for higher education expenses (college, graduate, or vocational school expenses). But have you considered a Coverdell education savings account? You may be able to contribute as much as $2,000 per year to a Coverdell ESA. You can withdraw money tax free from a Coverdell ESA to pay for qualifying educational expenses at elementary and secondary schools. Qualified expenses include the cost of tuition, room and board, uniforms, transportation, computer equipment, and more. Withdrawals for nonqualified expenses will generally be subject to income tax and an additional 10 percent federal penalty tax on earnings.

And you don't have to choose between a 529 plan and a Coverdell ESA. You can contribute money to both in the same year without penalty.

Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about 529 plans is available in each issuer's official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits.

GE 52271 (12/09)

If you are investing in a 529 plan outside of your state of residence, you may lose available state tax benefits. Make sure you understand your state tax laws to get the most from your plan.

529 plans are subject to enrollment, maintenance, administration/management fees and expenses. 529 plans are subject to fluctuation in value and market rise, including loss of principal.

Investors should consider the investment objectives, risks, charges, and expenses of 529 plans carefully before purchasing. More information about 529 plans can be found in the issuer's official statement. Please read the official statement carefully before investing.

Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent advisor.

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